Mergers and acquisitions of enterprises
Impact on employment and labour relations
Research of the Labour Institute / General Confederation of LabourConfederation of Civil Servants1
The Labour Institute of the General Confederation of Labour has
1.
carried out a research about the impact of mergers and acquisitions (M&A)
of enterprises in the field of employment and labour relations. The research
consists of 3 chapters: The first chapter describes the evolution of the M&A
phenomenon in the European area and its side-effects in employment and
labour relations, in combination with an analysis of the operative
institutional framework in Europe and in Greece with reference to workers’
rights during the transition to the new proprietary regime. In the second
chapter, the evolution of the phenomenon in Greece is described and the
case of Greece is analysed, by taking into account the entirety of the acts
recorded by the Hellenic Competition Commission during the period 19952005, categorised, after the processing of the primary material, by the kind
and the legal form of the act, the sector of economic activity and the
“nationality” of the enterprises involved. In the third part, an analysis is
made of the results of the research about the developments in employment
and in labour relations, carried out at local level based on a questionnaire
addressed to the labour unions and to the administrations of the enterprises.
The research aimed particularly at exploring the developments with respect
to the size of employment, to the employment policies pursued by the
enterprises involved in M&A and to the changes in the nature of labour
relations caused by the relevant acts.
1
The research of the Labour Institute / General Confederation of Labour-Confederation of Civil
Servants has been published and is presented in detail in the studies series (n. 30) of the Institute in
2008 under the general title “Mergers and acquisitions of businesses: Impact on employment and
labour relations. Theoretical and empirical research” (271 pages). The research was conducted by Mr.
G. Kouzis (scientific expert), Ms. A. Stamati, Mr. A. Matzouranis, Mr. K Boukouvalas, Ms. C.
Karakioulafi.
2. The research results focus in general on the following points:
As for the categorisation of the acts deposited with the Competition
Commission:
From the elaboration of the data regarding the conglomerates gathered by
the Competition Commission, there results that the phenomenon of
mergers and acquisitions in Greece assumed significant proportions during
the period 1995-2005, with a particular upsurge in 1998, 1999 and 2000.
This phenomenon remained equally intense also in the following years
(2002-2005); however, due to the insufficient data possessed by the
Competition Commission, a further qualitative analysis is not possible.
A popular means of concentration of enterprises is the take-over through
the acquisition of part or the entirety of the stocks of a corporation with a
view to obtaining the exclusive control thereof. As regards the nationality of
the enterprises in question, there results that most concentrations took place
between Hellenic enterprises, while cross-border concentrations in the
Hellenic market, if any, refer mostly to companies that have entered the
Hellenic market through multinational groups of affiliated companies.
As far as the various sectors are concerned, the sectors with the most
intense activity are the services sector, in particular the banking and financial
services sector, the trade and informatics sectors and also the construction
sector and the drinks sector, in contrast to the respective international
activity.
Finally, interesting conclusions are drawn from an analysis of the data about
multi-sector groups, as it appears that, in the Hellenic market, the
phenomenon of multi-sector merger occurs to a very limited extent.
3. As for the general conclusions with reference to employment and
labour relations:
The general conclusions deriving from the elaboration and analysis of the
research conducted by the Labour Institute / General Confederation of
Labour-Confederation of Civil Servants about the impact of mergers and
acquisitions on employment and labour relations are as follows:
3.1.
The restructuring taking place in the area of enterprises during the last
decade, characterized by changes in their proprietary regime, assumes mostly
the form of companies’ takeover. Such developments refer to the economic
control of enterprises by other financial circles and less often assume the
form of mergers. However, the recorded acts of M&A achieved higher rates
since the year 2000, a period in which economic competition has grown
stronger and which coincided with the introduction of the Euro, a fact that
boosted this development.
3.2. The acts of M&A are usually accompanied by changes in the overall rate of
employment of the enterprises involved in these acts (7 out of 10 cases).
The most usual development is the reduction of the total number of
employees and is followed by the stability and increase in employment.
3.3.
Staff reductions occur mostly after the act of M&A, while the 12-month
period preceding or following such act is usually the decisive period during
which the reduction in employment takes place.
3.4. The persons most affected by the restructuring procedure belong in a wide
range of categories and specializations, topped by clerical workers. The
reduction of unskilled workers is not a priority, but this category is dealt
with in a way similar to that of skilled workers and middle management.
The highest rate of job losses is recorded in the category of “aged” workers
(over 45 years of age) and in the category of 30-45 years of age.
3.5.
The voluntary termination of service is the most usual form of staff
reduction. This practice is followed by the non-replacement of the retired
employees when the staff reduction precedes the act of M&A and by
dismissals when the staff reduction takes place after the respective act.
3.6.
Dismissals are recorded in nearly half of the acts connected to the overall
decrease in employment, while the majority of the relevant acts are
connected also with personnel recruitment, which strengthens the presence
of skilled personnel and young employees against unskilled labour and
“aged” employees. Finally, 1/3 of new employment contracts refer to
flexible work.
3.7.
The acts characterized by stability in employment present the lowest
recruitment and dismissals rates and the related strengthening of the
presence of skilled personnel; however, there is a high rate of unskilled
labour as far as new recruitments are concerned, while half of the newly
hired employees work with flexible forms of employment. At the same time,
young persons of up to 30 years of age record the highest rates as far as new
employment contracts are concerned (3/4 of recruitments).
3.8.
The total increase in employment records, as a development, the lowest
rates, along with the higher use of recruitment and the lower use of
dismissals respectively. However, this result is based mainly on the unskilled
labour of young people, but also on the relatively lower rates of recruitment
of employees working with flexible forms of employment.
3.9.
Dismissals due to the act of M&A are more frequent than recruitments after
the year 2000. This phenomenon is connected mainly with the overall staff
reduction, a development regarding 1/2 of the related acts, 2/3 of the
dismissals, but it also occurs in case of an increase of the overall
employment (1/5 of the acts) and in the cases in which the number of
employees remains stable (nearly 1/10 of the related acts).
3.10.
Personnel recruitments are usually connected with the acts that increase
total employment, and they are more frequent in the cases of staff reduction
than in the cases in which the number of employees remains stable. In those
acts in which recruitments are accompanied by dismissals, the highest rates
of recruitment of young workers employed with flexible forms of
employment are recorded, while at the same time aged workers are
dismissed.
3.11. The acts of M&A are usually characterized by the stability or the increase
in the number of middle and senior management, but that does not mean
that the reduction of that number is not noticeable.
3.12. The acts of M&A are usually connected with information and consultation
proceedings between the representatives of the workers and the
employers; however, these proceedings are not usually concluded with
agreements regarding the terms of transition to the new proprietary
regime. The resulting agreements, in most cases of an indefinite duration,
mainly regard the conservation of employment; however, dismissals and
staff reduction are not avoided, despite the content of the agreements,
which, besides, are not legally binding.
3.13. The changes in corporate policies are extensive and regard at least 9/10 of
the acts, with emphasis being put on the manner of organization,
operation and management, on the nature of labour relations and on the
support of vocational training programmes.
3.14. Particular choices towards the personnel refer mainly to the strengthening
of managerial control and individual co-operations in the direction of the
individualization of labour relations and at the expense of collective
proceedings.
3.15. In at least half of the acts, the various levels of working rights that apply to
the personnel of the enterprises involved under the previous proprietary
regime are maintained, without being equalized.
3.16. The changes in the occupational regime which regard 80% of the acts refer
mainly to the manner of wage formation, with the introduction of meritbased remuneration systems, along with changes in staff regulations.
Changes in the field of labour relations are more extensive when it comes
to acts leading to an overall reduction of the personnel employed.
3.17. The reduction of “labour cost”, which regards 80% of the related acts, is
achieved mainly through the intensification of work and the increase of
flexible forms of employment, particularly the application of temporary
fixed-term contracts and the subcontracting by means of outsourcing.
3.18. The increase in the duties of middle and senior management is a
development that regards 3/4 of the acts of M&A.
3.19. The M&A are usually accompanied by an increase in the exports share (for
the enterprises that engage in exporting activity), a significant increase in
sales and investments during the first three years after the acts are
announced.
3.20. At least half of the enterprises involved in the related restructuring
procedure are listed in the stock exchange. The price of their stock usually
records a downward trend before the announcement of the act and an
upward trend afterwards.
3.21. The innovations in corporate policies and strategies accompanying the
M&A usually assume the form of organizational changes and investments
in new products and less often the form of new co-operations, the
introduction of new technologies and the creation of new specializations.
3.22. The category of acts entailing an overall decrease in employment presents
the highest rate of exports, investments, listing in the stock exchange and
increase in the stock price after the announcement of the M&A, while the
innovations applied maintain the introduction of new technologies and the
creation of new specializations at low levels, unlike the acts entailing an
overall increase in employment.