Abstract
The acquisition of physical assets is remarkably distinct from the acquisition of human capital assets. Holding physical asset size fixed, acquisitions involving more employees of the target firms are associated with lower announcement period returns. This effect is particularly stronger in (1) within-industry mergers, (2) cross-state mergers, and (3) mergers involving employees with a higher human capital market value. Each of these conditions suggests that MA that is, controlling for this variable, the relative size of merger is unrelated to announcement period returns. Our finding validates one of the most cited reasons of M&A failures: the employee factor. (Comments welcomed)
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