An Examination of Takeovers, Job Loss and the Wage Decline within UK Industry


  • The paper is based in part on the M. Phil of the first author, completed in 1997, entitled ‘Employment effects and performance of acquisitions: UK evidence’; under the supervision of the second. The authors are most grateful to the Institute of Accountants of England and Wales for financial support and to an anonymous referee. They also thank Ian Garrett, Marc Goergen, and Professors Len Skerratt and Martin Walker for their advice and encouragement. We are grateful to participants in seminars at the European Financial Management Conference on Corporate Restructuring in Barcelona in May 2001, the Universities of Manchester, Manchester Business School, Nottingham, Notingham Trent and the BAA National Conference in Glasgow at which earlier drafts of this paper were presented. Thanks especially Professors Andrew Stark and Steve Thompson. All errors remaining are ours alone.


This paper investigates the effects of takeovers on workers’ employment prospects and wages in the UK for the years 1987–1995. We address directly the idea that takeovers involve a ‘breach of trust’ with employees. Our results provide no support for the breach of trust hypothesis and rather suggest shareholders and workers in the post-acquisition joint entity are locked in a form of ‘equal misery’ following the execution of the takeover.

There already an exist a wide range of event studies documenting the effect of takeovers on shareholders and a smaller number of studies discussing the impact of takeovers on employees. The contribution of the present study is to relate the separate effects of acquisition on these two groups to each other. By doing so we seek to test directly the proposition that takeovers reallocate rents from workers to target shareholders, via the bid-premia paid on acquisition.