Analysis 3
Purpose

This article aims at using a new method that utilizes human capital theory to model M&A events as transactions that simultaneously have cross-level, real effects on workers, plants and firms, while the traditionally method just concentrates on firm level financial performance. After the empirical studies of M&A, the author gives us a conclusion that even though M&A decreases the size of establishments and firms, it increases productivity of plant and performance of firm does not change as well.

Terminologies

Mergers and Acquisitions:
Mergers mean that the company merged two or more independent enterprises to form a new one company. It usually consists of a dominant company to absorb one or several companies.
Acquisitions mean that a business with cash or marketable securities to buy another company 's stock or assets in order to obtain title to all assets of the enterprise or the control of the enterprise.
Human Capital:
Measure the economic value of employees' skills set. On the basis of this measure, all of the labor is considered equal basic production inputs of labor measures.
A bad match:
Even though a worker is not productive enough to permit compensation, he will get the common wage, which is same as the same industry.
Information asymmetry
Information asymmetry refers that one party in a transaction has more information than others.

Major Findings or Arguments:

1. From the Figure 1, Hypothesis one is approved. It claims that workers who work at M&A plant will get higher compensation than comparable workers. 2. The conclusion got from Table 3 is that overcompensation is decreased by M&A. 3. According to Table 4, the comparison result identifies hypothesis 3, which is employees who change their jobs after M&A will get higher earning growth than others. 4. After the plant level analysis, the graph indicates the productivity of plant is reducing before M&A, while the productivity of plant is growing after M&A. This result also proves hypothesis 5 and 6. 5. If plants change its owners, they will have higher output than others both before and after an M&A. Nevertheless, output and employment decreases after an M&A. 6. According to table 6, the productivity growth of partial acquisitions is 0.026 that is higher than full acquisitions (0.014). So acquiring part of plants will get better performance than acquiring full of plants. 7. From table 7, the growth of percentage of workers who are college educated is 0.153. The increase rate of experience from five-year before to five-year after is 0.148, and M&A also has a positive effect on earnings which growth rate is 1.3%. All of these results suggest that plants which experience M&A have a growth of percentage of workers who are college educated, experience and earning, while comparable plants do not have.

In my opinion, the author summarized that M&A enhanced the efficiency of plants and increased the quality of workers, which is convincible. But when he analyzed the hypothesis 2, he stated that M&A would downsize the workforce. In other word, when M&A happened, unemployment would increase in the industry. Maybe the high unemployment rate would not benefit the whole industry because of instability.
Methodology

The author uses three-level regression (worker-level, plant-level and firm-level) model to identify the 7 hypotheses. 1. Table 2,3 and figure 1 are work-level regressions, which utilize the coefficient on the M&A dummy variables to find the relationship between workers’ earning and M&A dummy variables. 2. Table 5 suggests both the firm-level and plant-level studies. It identifies the relationship between M&A and productivity of plants, output and employment. 3. Table 5, 6, 7, and figure 2 are plant- level regressions. By using the coefficient, the author gets the relationship between the degree of M&A and plants’ performance (employment, output and productivity). Additionally, he also gets that M&A positively affects the quality of workers through analyzing the regression data.

Analyzing the effect of M&A through three main equations and regressions is very convincible and objective. The three level regressions gave us a clear map to identify 7 hypotheses.

Application of the research

I can apply the results of this research from two aspects: its findings and methodology. From its findings, I know that as a manager of company, in order to get better performance and avoid information asymmetry, partial M&A is better than full acquisition. Additionally, in the process of M&A, matching theory plays a significant role. It is a good opportunity to enhance the quality of employees. And I will not worry about reducing size of workforce and output after M&A because it results in a growth of productivity.
From its methodology, I can use these three level regressions into other industries other than manufactory or other countries except Sweden.

Questions

1. How do we define the partial acquisition? How many percentage of acquisition happened is recognized as partial acquisition?
2. What method could we use to avoid a bad match?
3. From the research, M&A will enhance efficiency of plants through better matching between workers and plant but downsize the employment. Is it will increase a country’s rate of unemployment?