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Firm growth in the course of mergers and acquisitions

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  • Dirk Burghardt
  • Marco Helm

Abstract

This paper examines the effect of mergers and acquisitions on employment growth in newly acquired firm establishments. Based on a unique full sample of manufacturing and services firms in Switzerland, our main finding is that the relative size of a deal is an important growth determinant: While the initial size of the acquiring firm is positively related to an acquired establishment’s growth, the opposite holds true for the initial size of the acquisition. We also contribute to a controversial debate on firm growth in general by rejecting Gibrat’s law of proportionate growth for firm establishments in Switzerland. In fact, employment growth decreases with an establishment’s initial size and age—at the aggregate level as well as within separate subsamples of manufacturing and services firms. Copyright Springer Science+Business Media New York 2015

Suggested Citation

  • Dirk Burghardt & Marco Helm, 2015. "Firm growth in the course of mergers and acquisitions," Small Business Economics, Springer, vol. 44(4), pages 889-904, April.
    • Handle: RePEc:kap:sbusec:v:44:y:2015:i:4:p:889-904
    DOI: 10.1007/s11187-014-9624-y
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    3. Karen Geurts & Johannes Van Biesebroeck, 2019. "Employment growth following takeovers," RAND Journal of Economics, RAND Corporation, vol. 50(4), pages 916-950, December.
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    6. Marius Tuft Mathisen & Raj Krishnan Shankar & Øystein Widding & Einar Rasmussen & Alexander McKelvie, 2022. "Enablers of exit through trade sale: the case of early-stage research-based spin-offs," Small Business Economics, Springer, vol. 59(2), pages 521-535, August.

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    More about this item

    Keywords

    Firm growth; Employment; Gibrat’s law; Mergers and acquisitions; Deal size; Establishment-level data; Switzerland; G34; L11; L25; M51; L26;
    All these keywords.

    JEL classification:

    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • M51 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - Firm Employment Decisions; Promotions
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship

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