Canaries in the coal mine? Employee job search during mergers and acquisitions

Abstract: We use proprietary data from a job search website to reveal how employees look for new jobs around mergers and acquisition (M&A) announcements. We document several new empirical findings. First, we observe a significant increase in employees’ job search activity approximately five months before an M&A announcement. In contrast, abnormal stock returns for target companies materialize approximately one month before the announcement. Second, we see dispersion in the types of employees who search for new jobs over time. Workers who perform managerial tasks in the organization are more likely to search for new jobs prior to merger announcements, while lower-level employees are more likely to begin search after the merger announcement. Third, employees who search later in the M&A process target significantly lower wages in the outside labor market relative to other job seekers in the population. We develop a model that incorporates M&A into a job search theoretic framework in order to explain these findings.