An Empirical Analysis of Post‐Merger Organizational Integration

Valerie Smeets, Aarhus School of Business; Universite Libre de Bruxelles (ULB) - European Center for Advanced Research in Economics and Statistics (ECARES), Kathryn Ierulli, University of Chicago, and Michael Gibbs, University of Chicago Booth School of Business; Institute for the Study of Labor (IZA) provide An Empirical Analysis of Post‐Merger Organizational Integration.

ABSTRACT: We study post‐merger organizational integration using linked employer–employee data. Integration is implemented by reassigning a small number of high‐skilled workers, especially in R&D and management. Workforce mixing is concentrated to establishments set up after merger, rather than to previously existing establishments. Worker turnover is high after merger, but new hiring yields stable total employment. Target employees have higher turnover and reassignment, particularly if the target firm is small relative to the acquiring firm. These findings might suggest that integration is costly, but can be achieved by focusing on key employees. Alternatively, the reassignment of a few key employees is sufficient for achieving integration.