M&A deals reduce Italian firm employment by 4 percent
A Bank of Italy occasional paper examines mergers and acquisitions across Italy and Europe from 2014 to 2024. The study finds that consolidated firm employment declines by 4 percent and turnover by 5 percent following corporate transactions.
Six thousand deals annually
Using administrative data from InfoCamere and Moody's Orbis, researchers Irene Di Marzio and Sara Pinoli analyze M&A activity in Italy between 2014 and 2024.
The study records approximately 6,000 domestic M&A transactions annually, with an increasing trend over the past five years.
M&A activity predominantly involves high-tech manufacturing and knowledge-intensive service firms.
Nearly a fifth of Italian capital companies that grew to over 250 employees between 2019 and 2023 were involved in such transactions.
Target firms in Italy exhibit higher profitability and lower debt compared to their European peers, while domestic deals represent two-thirds of all recorded transactions.
Restructuring over expansion
Applying a staggered difference-in-differences estimator, the paper evaluates the post-acquisition performance of consolidated firms compared to control groups.
In the five years following a transaction, employment in the consolidated firm drops by 4 percent and turnover by 5 percent relative to the counterfactual scenario.
This contraction is partly driven by asset spin-offs and corporate reorganizations.
Furthermore, transactions in non-tradable sectors are associated with an increase in local market power, whereas deals in tradable sectors show no significant structural effects on scale.
Consolidation without growth
The study provides rigorous empirical evidence challenging the narrative of unmitigated synergy gains from corporate mergers.
By documenting post-acquisition scale reductions and rising local market power, it highlights the hidden costs of restructuring.
Policymakers must closely monitor how consolidation shapes competitive dynamics in non-tradable service sectors.