Controversial opinion on capturing cost synergies
I don't think there's any reason to feel guilty about eliminating positions in the name of capturing expense synergies.
In all cases, a company will eventually go through a transition in ownership. In cases where a target gets acquired by a near identical company and has the admin and operations personnel to absorb the new business, there should be no reason to keep now redundant employees. It should always be the goal of new owners to see if there are other positions that can be filled with redundant staff but if this isn't possible, it does those employees no good to have them essentially sit on their hands all day while shareholders eat the costs.
However, it also serves ownership good to give these same employees ample time on payroll so they can find other work (not only is it the decent thing to do, but it shows current employees that ownership won't completely leave them out to dry).
Thoughts?
I don’t think most bankers have any feelings about cost synergies besides it being some numbers they have to flesh out in their models.
I disagree. I’m sure everyone who has done these exercises, unless they are green or completely oblivious, knows what these analyses are being used for. I also have no doubt that those same people, myself included, have struggled with this moral dilemma.
Yes, I agree that most bankers know what these analyses are being used for, but I don't think most bankers have a big moral crisis over this. Anecdotally most bankers accept layoffs to be a natural part of the economy and the business world, and don't take things too personally. Would also argue that in American culture (driven by America's acceptance of the boom-and-bust business cycle) layoffs are also widely seen as "natural" and in many ways inevitable, and most Americans don't have big moral dilemmas over hearing layoffs happen, unless it's charged by political polarization, which may cause Americans to be more partial to layoffs (eg. with big tech and Wall Street vilified so much I wouldn't be surprised if the common people cheered for our layoffs).
Pretty easy to get over any of the moral dilemma by just chalking it up to shareholder value. Sure you may chop some jobs but you’re also (theoretically) generating capital gains for thousands of stockholders
“Yea it’s definitely fine to monetize these juicy synergies in the event of a takeover, but god forbids if the banker himself becomes a synergy 😡😡😡”
you'll feel bad about causing layoffs but after a shit bonus you won't feel anything anymore.
You're looking at cost synergies from only one lens, equating it to reduction in force. This is often not the case. In my line of work, we often use cost synergies to account for many things, including but not limited to; reduction of R&D expense, improved operational efficinency relating to increased manufacturing output, and reduced costs of raw materials via a vertical integration acquisition. Depending on the industry you operate in, cost synergies can mean far more than just headcount reduction.
With respect to headcount reduction specifically, I think it is more justifiable because we all need to be cognizant of the fact that excess fat always gets trimmed, regardless of M&A or not. If suddenly my team hires another body at my level and I find myself to be the less qualified employee, I may verry well find myself out of employment quickly. The only way you are guaranteed continued employment is through self employment, and we would all be wise to remember that.
The fact that you needed to go through this cope exercise means you probably do actually feel guilty. The people who don't feel guilty (99% of bankers) don't think about this at all.
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