This paper considers whether gains made by shareholders from corporate takeovers are achieved at the expense of employees, as proposed by the 'wealth transfer' perspective. It analyses the contribution of employee lay-offs, along with employment and wage changes, to the takeover premium and abnormal share price movements. The analysis draws on a unique dataset of British takeovers, combining documentary, share price and accounting data. The results show that lay-offs planned at the takeover have either no effect or adverse effects on shareholder returns. Wages growth is positively, not inversely, related to shareholder returns from the second year after the takeover, whilst positive employment changes have a similar effect in the following year. Closer scrutiny indicates that labour and shareholders share gains when the firm does well, but share pain when it does not. There is evidence, therefore, that labour and shareholder interests can be complementary, rather than antagonistic, after takeovers.
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This paper analyses the impact of activist hedge funds (AHFs) on post-merger workforce downsizing and operating performance. AHFs have been widely criticized for achieving short-term gains at the expense of other stakeholders, such as employees. The results show that AHF ownership and presence in acquiring firms is a significant determinant of post-merger employment reductions. There is little evidence that these mergers and acquisitions have better operating performance relative to other takeovers. However, there is a negative effect of AHF ownership on labour productivity. Overall, the results are consistent with the view that AHF involvement in takeovers does not lead to sustained gains in performance. 1 In 2015, Trian owned a 7.2% stake in Pentair plc and urged the company to increase value by facilitating 'prudent industry consolidation'. In that year, Pentair acquired a privately held component manufacturer for $1.8 billion in cash. In 2017, Pentair sold a valves and controls business it had acquired a few years earlier for $3.2 billion and decided to split its largest businesses, electrical and water products, into two separate companies (The Deal Pipeline, 2017).
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