Mergers won’t help the job market
TEXT OF STORY
JEREMY HOBSON: Well Groupon is not the only company getting buyout offers and venture capital financing. 2010 was the year mergers and acquisitions returned to the economy. Global mergers were up almost 20 percent this year. And more are expected next year.
Marketplace’s Eve Troeh reports on what that means for the job market.
Eve Troeh: When companies merge, it might mean a new name on your paycheck.
Clip from “Seinfeld”: “Hey you guys, what’s the name of the new company going to be?” “We combined Morgan and Poland — Moland Spring.” “Moland?”
Or it might mean no paycheck. Mergers often lead to layoffs.
David Becher teaches finance at Drexel University. He says layoffs will be minimal — companies are already running lean and mean.
David Becher: It’s gonna be very hard to slash a workforce when you do a merger if you’ve already cut to the bone.
And that’s why he calls this round of mergers strategic. Companies have stockpiled cash during the recession — a historic stash of nearly $2 trillion. Shareholders want returns, so now bigger firms are buying smaller ones that will grow — eventually.
But that doesn’t do much for the job market right now, says James Brock at Miami University. What would? Companies growing internally.
James Brock: That is, new plant, new equipment, research and development, rather than just buying something that somebody else has already built.
I’m Eve Troeh for Marketplace.
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