Mergers and acquisitions destroy leadership continuity in target companies’ top management teams for at least a decade following a deal, according to a Virginia Commonwealth University study published in the Journal of Business Strategy.
The study, “The Big Exit: Executive Churn in the Wake of M&As,” demonstrated that mergers and acquisitions do not result in instability among management at target companies solely in the short-term, as is often assumed, but result in abnormally high turnover that lasts much longer. Target companies lose 21% of their executives each year for at least 10 years following an acquisition – more than double the turnover experienced in non-merged firms.
“These findings are especially important in light of the correlation between the loss of top executives and a company’s poor performance,” Jeffrey Krug, associate professor of strategic management in the Virginia Commonwealth University School of Business and lead author of the study, said. “Companies involved in these deals need to understand the long-term effect on their executive ranks and they need to find ways to keep key executives on board.”
Krug studied the turnover patterns at more than 1,000 firms and examined the employment of more than 23,000 executives. Krug said recent mergers and acquisitions have created even greater instability within executive teams as globalization and technology trends continue to increase the intensity of competition and generate industry turbulence.