When a company is sold, what happens to employees?
As the title suggests: if a company is acquired what happens to the employees? Are they all made redundant and only they executives remain? Do they have to re-interview / find a position in the new company? Does it just depend on the strategy set by the new company?
I am asking as I was reading up about the LinkedIn/Microsoft deal and it seems like beyond a financial decision, nothing changed in terms of employees / recruiting / setup. Curious to learn more.
This is a very elementary question and you can find a wealth of knowledge on this with a quick Google search. Nevertheless, more often than not there is always some headcount reduction after M&A, especially if a sponsor is involved. It’s just the normal result of M&A and one of the primary ways you realize those ambitious synergies we always talk about. Yes, in strategic mergers you tend to have redundancies so this will drive headcount reduction. Yes, I have seen situations where people re-interview (mostly at an executive/manager level). Yes, the buyer drives the new strategy. Sometimes M&A is done specifically to acquire the targets employees primarily for their skills/expertise. Search acquihire. Mostly see this in the tech space. In this case, there may be very little or no headcount reduction at all.
Regardless, at the end of day, M&A usually will always mean headcount reduction. I actually can’t think of one M&A model I’ve built where there wasn’t some SG&A reduction as a result of firing people.
Some common sense is in order.
Do you need 2 CFOs? No. Are you going to fire all the Twitter programmers who know the code inside and out, and replace them by making Microsoft coders work twice as much? No.
Just think about it in terms of fixed versus variable costs. If you add products/code, you probably need more people to design, build and market those products. It might not be totally linear, but there's only so much leverage you can get there. On the other hand, companies only need 1 CEO, 1 CFO, 1 head of HR, etc...whether they are a $10MM business or a $100B business.
Then you obviously get other economies of scale like only having to file 1 set of financials with the SEC; leveraging service providers; etc...
The reply you got is accurate so maybe I can provide you with am afterthought. Headcount reductions could also take place when people voluntarily leave the acquired company and often this is the case when a place with relatively good branding gets bought over by one or "lesser standing".
Examples include: - Barclays Private bank being bought over by a regional player in Asia (employees of Barclays would become employees of this regional bank post acquisition) - Chinese mega pharma company buying sygenta (sp? forgive my spelling)
General rule of thumb is that the closer you are to the asset that the acquiring company wants the safer you all. It's not uncommon for personnel in those areas to be "bought in" and compensated to stay through the upheaval.
This.
Do you need the full complement of two Accounts Payable/Accounting groups? What about HR?
This is not to say that the entire group/department/division would get laid off. But you'll find a lot of duplication there that doesn't directly impact the product/service being acquired.
In terms of re-interviewing, this is typically dependent on the buyer. I've heard of these going both ways (but at the end of the day, if you are employed by the seller, your information will eventually have to end up in the systems of the buyer...sometimes the easiest way to do this is to reapply rather than try to mash up incompatible HR systems.)
Obviously you'll see engineers or product people retained, but what normally happens to the sales division or customer support function. Would you see massive reductions in these departments or are they considered "close enough to the product" to be valuable.
They become the synergies. Synergized so to speak.
If it's a hostile takeover, I believe they are executed.
So that's why they're called "corporate raiders."
That escalated quickly! +1SB ha
"murders and executions"
It's going to depend on the type of business acquired, and how it relates to the buyer.
If McDonalds buys out another fast food chain, they probably won't need 2 sets of district managers, 2 sets of cooks designing menu choices, etc.
However in the case of LinkedIn/Microsoft, since the nature of the two's business is so different, not much happens beyond Microsoft having a new cash flow and access to a new network.
Of course there are always admin functions that get duplicated to varying degrees. So there are always some layoffs to take advantage of economies of scale. But usually not anything as drastic as telling an entire department to go home.
MSFT bought LKDN to make Office 365 more potent and Dynamics CRM integrated with LinkedIn = "real time data managed by the contact." (user comment) -Read https://www.linkedin.com/pulse/linkedin-microsoft-changing-way-world-wo…
Weiner's statement:
Often hanged. However, in large organizations the cost of rope becomes so expensive that Cyclon B is preferred.
When we acquire we make sure to do a couple impact firings. Let the acquired employees know who runs the show.
The CEO's of both companies fight to the death in a gladator style battle. Very cool.
They get swallowed up by the new company. The nutrients flow through the arteries but the crap goes out the shitter
That's a... very apt analogy, actually.
Sometimes, there's a twinkle of brilliance in me that will give you hope
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