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Department of Economics, Aarhus School of Business, University of Aarhus Working Papers, Department of Economics, Aarhus School of Business, University of Aarhus

No 06-8:
Mergers of Equals & Unequals

Valérie Smeets (), Kathryn Ierulli () and Michael Gibbs ()

Abstract: We examine the organizational dynamics of integration post merger. Our basic question is whether

there is evidence of conflict between employees from the two merging firms. Such conflict can arise

for several reasons, including firm-specific human capital, corporate culture, power, or favoritism.

We examine this issue using a sample of Danish mergers. The results are consistent with the basic

hypothesis. Controlling for other effects, employees from the acquirer fare better than employees

from the acquired firm, suggesting that they have greater power in the newly merged hierarchy. As

a separate effect, the more that either firm dominates the other in terms of number of employees,

the better do its employees fare compared to employees from the other firm. This suggests that majority

/ minority status is also important to assimilation of workers, much as in ethnic conflicts. Finally,

greater overlap of operations decreases turnover. This finding is inconsistent with the view

that workers of the two firms may be better substitutes for each other. However, the result and our

other findings are consistent with the view that more similar workers (in terms of either firm- or

industry-specific human capital) are easier to integrate post merger

Keywords: Mergers; internal organization; conflicts; personnel economics; (follow links to similar papers)

JEL-Codes: G34; J63; M14; (follow links to similar papers)

36 pages, January 1, 2006

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