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Qualified employees who make less than others so dump the overpriced ones. Sometimes a company (buyer or seller) has an over inflated payroll that needs to be trimmed and brought inline with the new combined business model.
Qualification standards are now higher in some fields causing lay offs even if it means having to hire. Buyer or seller may have a workforce of much higher qualified individuals. As they are incorporated into the new combined business, those with less abilities may be let go.
Oh It's Joe! Yep, the decision makers at the new company may have been someone you p'ed off at some point in your career. It's easier to just lay you off as dead weight and move on.
However, duplication is the primary reason accounting for most layoffs followed by overpaid waste.
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The leaders of the new combined operation may also want to choose their own upper level people, and have to make room by getting rid of those already in those positions. Then there is corporate culture, some people may no longer fit with the new combined organization. Most of is redundancy, though.
All kinds of reasons. The most obvious is duplication. If one person can do a task and each company had such a person, then one is superfluous. Then you have economies of scale.....you can generally do a greater volume of the same work with fewer people the larger you get. Those are the largest drivers is my experience.
Last edited by CrowGirl; 05-02-2017 at 08:22 PM..
Reason: fix typo
It also could be a simple business decision. A lot of 'mergers' are more of an acquisition. The company isn't being bought for their employees, they are being bought for their customers. Once you get the customers, the employees are no longer needed so out the door they go. Happens all the time.
I know that duplication is often cited as a reason. Are there any other reasons?
Quote:
Originally Posted by headingtoDenver
It also could be a simple business decision. A lot of 'mergers' are more of an acquisition. The company isn't being bought for their employees, they are being bought for their customers. Once you get the customers, the employees are no longer needed so out the door they go. Happens all the time.
Good point.
A merger is when two companies form a new company. Lay-offs often occur with job duplication.
An acquisition occurs when one company buys another company. Lay-offs may occur depending on the reason for the acquisition. When the purpose of the acquisition is to expand the customer-base, lay-offs or down-sizing often occurs. Sometimes the reason for an acquisition it to acquire technology, research or to expand production, in which case lay-offs may not take place.
It also could be a simple business decision. A lot of 'mergers' are more of an acquisition. The company isn't being bought for their employees, they are being bought for their customers. Once you get the customers, the employees are no longer needed so out the door they go. Happens all the time.
this is very true , especially within sales departments .
shrewd businessman don't buy companies .
they find companies who are financially troubled with cash flow issues but have a large customer base . they hire the owners to come work for them , hire the sales people , buy any usable inventory and get all the benefits of buying a company without buying it .
once they win the customer base over the employee's are dispensable.
my old company went from a a few employees in a repair shop in a store front to a 100 million dollar company that way .
It's not just a merging of assets. There is also the merging of two corporate cultures, two brands, and two ways of doing business. And aside from the needless duplication of function (Two AR departments, two marketing departments, etc.), there is also staffing that isn't required with the new strategic direction of the company.
I've spent a lot of time consulting for banks. Being number-oriented guys, bankers are particularly prone to looking at two balance sheets and thinking that's all there is to it. But even banking cultures can vary widely in terms of approaches to underwriting, market footprints, product mixes, you name it.
One banking client, a mid-sized regional bank, snapped up a smaller bank with thirty branches. The larger bank was more retail driven, letting volume and economies of scale drive revenue and profitability. The smaller bank was more service driven and less rigid in underwriting, giving a lot more responsibility to the branch managers. Talk about two value systems on a collision course. By the time a year had passed, every single one of the branch managers of the acquired bank was replaced. Not intentionally, but because they just didn't want to do business in the way the larger bank required.
Never forget the effect of power players. Whenever a new CEO is involved, that CEO is going to be looking for people willing to be loyal to him. At one small company decimated after KKR, and bought after the fat had been sold off, the new CEO literally brought along a half-dozen of his loyal employees, moving them all over 1,000 miles.
In another case, A CEO that was the alpha wolf in an acquisition was an out-and-out thief. He brought in people that were willing to turn a blind eye, firing anyone with scruples.
"Redundancy" is often a public marmalade used to sweeten the surface of harsh and unfair business practices.
There is no reason for 2 VPs of Tax. No need for 2 Directors of Federal Tax Planning. No need for 2 Directors of State tax. No need for 2 General Counsels, 2 VPs of Patents, 2 VPs of Litigation, etc etc etc etc.
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