From a talent perspective, mergers are often far from ideal, with many employees choosing to leave an organization after it has been acquired by another firm.  Research from Harvard Business School identifies at least one benefit, however, as the managerial team of the new firm is likely to be more diverse as a result of the merger.

The researchers assessed over 37,000 mergers and acquisitions from across the United States over a 44 year period and found that companies that have been acquired add around 15% more managers from minority backgrounds and 4% more female managers than similar firms that had not been acquired.

“The assumption many people may have is that in a crisis, like an acquisition, adversity undermines diversity,” the researchers say. “But disruption creates possibility for a positive change. When the old ways are not working, we need to shake things up, and these disruptive events do just that.”

New possibilities

The researchers monitored each acquired firm for a total of ten years, which covered five years period to the acquisition and five years afterward.  The biggest boost to diversity occurred in acquisitions in the same industry.

The researchers also conducted numerous in-depth interviews with senior managers and M&A consultants to understand better what happens after an acquisition in terms of restructuring.

Both the interviews and the data found that companies typically diversify in one of two ways.  Either it’s a side effect of managers removing unwanted personnel or a more intentional drive to create more diversity in the management ranks.

A new start

Despite a lull in M&A activity during the pandemic, there are still around 5 million workers affected by them per year.  While many mergers result in staff reductions, the data does at least suggest that women and other minorities may secure promotions.

This is often because mergers can prompt internal changes, such as the standardization of HR functions and the introduction or promotion of diversity programs.  What’s more, the acquisition can also shake the purchased company out of its inertia and change for the better.

With mergers and acquisitions picking up again in the aftermath of the pandemic, the researchers are confident that the disruption caused by them can be a force for good in terms of the opportunities they provide to rethink HR practices.

“This is the moment when you can hit the reset button,” they conclude. “How firms approach diversity issues during these critical moments could affect their inequality for many future years.”