M&A in Europe 2000-2007: Layoffs and Their Impact on Post-acquisition Performance: A study of the mediating effect of workforce reductions on the relationship between acquisition premiums and post-acquisition performance

Abstract: The purpose of this thesis is to examine whether information regarding layoffs as a result of mergers and acquisitions can be used to explain acquirers’ post-acquisition performance. I predict that high acquisition premiums result in workforce reductions and that the latter thus lead to lower post-acquisition performance of the new combined firm. This is in line with the growing interest in HR-related theories according to which laying off employees is commonly seen as a fast way of reducing costs, although this strategy is not automatically beneficial. 102 acquisitions made by European firms in the period 2000-2007 are analyzed in order to establish whether the mentioned determinants of post-acquisition performance are statistically significant. This is not found to be the case. Using a four-step mediation model and controlling for eleven other explanations, results suggest that I cannot conclude that workforce reduction plays a mediating role in the hypothesized negative relationship between acquisition premiums and post-acquisition performance; rather deal-specific characteristics may be regarded as better determinants of post-acquisition performance.