M&A and Job Creation
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I think this is a topic where there are strong arguments on both sides…
Do M&A deals create or destroy jobs in the long run?
Interested to hear your thoughts…
I think that M&A deals may potentially destroy jobs in the long run. If company A and B both have a CFO, it is likely that they will only require 1 CFO, and the other CFO will either be demoted or made redundant. This will be a good thing for the company as a means to cut costs, but on the other hand, it may mean more unhappy emoployees.
M&A does create and kill jobs. Basically, some jobs will no longer be required / relevant whereas some jobs will evolve. In the process, new jobs are also created.
I think mergers create unique opportunities for top talent. I do think there are areas that face significant FTE cutbacks.
I think it is dependent on the size and the structure of the two organizations. If both are relatively small and this could be doubling their size, then I would think it would create positions to be able to handle the jump in assets. If it is a large taking another medium to large organization, you will see more jobs being dissolved due to redundancy in positions.
I see M&A activity ultimately reducing resources, HR and otherwise. The goal is to take two companies and create one (somehow), which ultimately, would require a reduction for efficiencies.
Whilst I agree that M&A deals tend to lead to redundancies and job losses due to role duplication, I do also see cases in which acquisitions can lead to job creation. For example, in the case of an acquirer purchasing a foreign company to enter a new market, the acquirer may possess superior technology and financial power enabling the merged entity to expand in that market. Such an expansion would undoubtedly require new hires.
I think it depends on the job level. Top management level will most likely be replaced but sales team can also grow with an acquisition.
it depends. Take the acquisition of Genentech by Roche, I would suggest that, in that specific case, i.e. without integration, the holding has been successful at creating more jobs rather than erasing some by bringing more power to Genentech to reach their objectives.
It depends on the success of the deal and the industry. Short-term reduction in head count should result in long-term sustainable growth when M&A is done right. As a result, new jobs will be available. Industry also needs to be considered as M&A in mature industries will likely result in job losses in comparison to a growing industry.
In my view, it kills senior management jobs as there would be redundancies. For the mid and low level roles, the redundancies would likely be short term and if the merger is successfully executed, with value creation, there is opportunity for unprecedented growth.
I believe that well planned synergies do create jobs on the long run. Many believe that M&A process and subsequent restructuring leads to re-organizational job cuts. This is correct, however in the short term situations. The long term development is usually job “creative”.
I don’t think this situation creates jobs but it doesn’t destroy jobs either. There are various elements which change the situation eg job level, type of transaction etc. It looks like many add-on acquisition transaction create extra jobs / divisions or tittle. In contrast, mergers may result in major job losses and changes in employees.
Except in cases where M&A is executed as a defensive play in the market, I think the very existence of a synergy strategy dictates that there must be net job growth in the typical NewCo whose revenues are related to its direct labor costs. Indirect labor costs from the back office, including the leadership team, will of course be subject to rationalization, but in my experience indirect labor should be 10% or less of any workforce with direct labor.
I agree that successful M&A usually creates jobs. Although there is typically a consolidation of jobs in PMI, if an acquisition ultimatley grows the company in the long term, the jobs created by this ongoing growth should be net positive for an acquisition.
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