Assortative Matching in Mergers: Evidence from Skill Demand

Abstract

Using job skill requirements from the near universe of online job postings, we show that similar hiring strategies for job skills increase the likelihood of mergers among firms, consistent with assortative matching (i.e., Rhodes-Kropf and Robinson, 2008). Moreover, a firm is more likely to become a target if (1) its skill requirements become more similar to the top skill requirements of its potential acquirer, and (2) it is seeking to hire relatively experienced employees. Following the merger, the combined firm continues hiring in skills that are similar between the two firms. We show that lower search frictions and integration costs lead to increased assortative matching in mergers, consistent with prior theories. Mergers induced by similar skill demand experience more synergies, which largely accrue to the acquirer.