M&A Is a Key Source Of Corporate Layoffs

One out of 10 workers who lost their jobs in the first three quarters of 1998 did so as a result of a merger or acquisition, says John Challenger, executive vice president of the international job placement firm of Challenger, Gray & Christmas Inc. There were 431,456 job cuts in the first three quarters, and 44,742, or 10.4%, were the result of a merger or acquisition. The most active m&a layoff period was the second quarter, in which 23,240 of the 44,742 merger-related job cuts, or 52%, were logged. Challenger added, though, that the numbers don’t fully capture the magnitude of layoffs due to m&a in the first nine months of the year. What are missing in the data, he says, are job cuts resulting from the recent string of high-priced deals, in which layoffs have not been announced yet. He believes that those deals most likely will require cost-cutting measures in order to help pay the steep purchase prices. Seven of the 10 biggest deals in U.S. history were announced in the second quarter. However, only merger partners NationsBank Corp. and BankAmerica Corp. have yet announced job cuts as a result of their deal. “When companies merge, there are job losses, but they are not always announced right away. A lot of companies take time to circle each other and figure out how the newly structured organization ought to look. One of the primary drivers of many mergers is to allow the companies to take advantage of economies of scale,” Challenger comments. Postmerger layoffs often displace productive employees through no fault of their own, he adds. Who is laid off after a deal depends on the nature of the deals, new strategic business plans, and the industry forecast. In general, layoffs fall into two broad categories: streamlining and redundancy. When a company streamlines it attempts to use its resources in a more efficient way and use as few employees as possible to achieve its goals and remain competitive. On the other hand, reductions due to redundancy occur for obvious reasons: the company doesn’t need two separate accounting departments, etc. Losing Out Challenger believes that although m&a-displaced employees enter the job market with “somewhat of a no-fault’ tag attached to them” and they seemingly haven’t lost their jobs because of poor performance, some prospective employers still feel that companies keep their top performers and jettison those who are not as productive. “I don’t think they have any real edge in finding a job,” he remarks. He says that one of the things that hurts many people when companies merge is that there is often little help given to the people who are let go. Usually, the acquiring company keeps its own people, and it’s the target employees who are most vulnerable to job loss, he notes. He feels that merging companies need to do a better job of providing counseling and outplacement help in finding new jobs for displaced employees. Layoffs Resulting From Mergers 1998 Total Merger % ofMonth Cuts Cuts TotalJanuary 72,193 630 0.9%February 43,919 7,480 17.0March 23,028 196 0.9April 48,758 8,420 17.3May 27,631 7,970 28.8June 54,914 6,850 12.5July 50,774 1,110 2.2August 37,177 2,215 5.9September 73,062 9,871 13.5Total 431,456 44,742 10.4Source: Challenger, Gray & Christmas Inc.<\TBL>