WRITTEN QUESTION E-1459/03 by Herman Schmid (GUE/NGL) to the Commission. Employment and economic effects of takeovers.
Date: 2003-04-29
Institutions: European Parliament, Provisional data
Subjects: competitiveness, economic analysis, economic consequence, industrial restructuring, merger, profitability, shareholding, social dialogue, social partners, unemployment

C 280 E/148

Official Journal of the European Union

EN

21.11.2003

Category III is comprised of pupils who are not covered by I or II. They are admitted if places are available.
An order of priority applies for admission and school fees are payable.

Responsibility for applying the Board ruling when pupils are enrolled rests with the headteachers of the
Schools.

(2003/C 280 E/166)

WRITTEN QUESTION E-1459/03

by Herman Schmid (GUE/NGL) to the Commission

(29 April 2003)

Subject: Employment and economic effects of takeovers

The European Parliament’s Directorate General for research has concluded a study on ‘Employment and
economic effects of corporate restructuring and takeover’ (Division for Social and Legal Affairs IV/WIP/
2003/01/008). It gives an overview of empirical studies in this field and draws some general conclusions.

Studies in UK, where most mergers and acquisitions (M & A) take place, have found UK takeovers to be
associated with significant falls in both employment and output. Employment in the new firms post-
takeover drops on average by 11 % in the five years following the bid.

The Parliament study refers to Unctad’s World Investment Report 1999:
‘Empirical evidence shows a
puzzling result, M & As fail in terms of wealth creation in remarkably high numbers’ (IV/WIP/2003/01/008
p. 6). It shows that the most common result of a merger is the following: profitability and productivity do
not improve, it seems to have a decelerating impact on market share growth, it is likely to have a negative
effect on R & D investments, etc. It is beyond any doubt that the employees will be profoundly effected by
a merger, due to changes in organisational structure, employment and working conditions and lay-offs.

What is the usefulness of takeovers if they are not empirically and unambiguously found to create wealth?

How does the Commission justify the proposal to have companies inform and consult with employees,
although they can be ignored in the final descision, knowing that many of the mergers result in major job
losses and profitability does not improve, or improves less than could have been the case without the
merger?

Answer given by Mrs Diamantopoulou on behalf of the Commission

(23 June 2003)

It is true that many restructuring operations, mergers and take-overs do not sometimes produce the
anticipated result in terms of increasing profitability, competitiveness and productivity of the companies in
question. But the question whether this is always the case is a very debated one (1). In fact, some studies
have argued that mergers and acquisitions can reduce production costs, increase output, improve product
quality, obtain new technologies or provide entirely new products. Some other studies have pointed out
that the implementation of a merger is often problematic and difficult, which explains why a large number
of mergers fail to deliver their promises in terms of value creation and synergies. One should therefore be
cautious about sweeping statements that mergers always fail. Mergers and acquisitions are sometimes the
best way for some firms to improve their efficiency. They are generally considered neutral if not beneficial
for the economy; for instance, the Community Merger Regulation, in Article 10(6) establishes a general
presumption of legality for concentrations of Community dimension. In any case, the conduction of
business is a prerogative of management in which the Union should not intervene.

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That being said, mergers and acquisitions typically lead to corporate restructuring. The ability of firms to
quickly re-deploy their activities is a key factor of competitiveness for the European economy, and
consequently for the creation of jobs in the long run. However, it is also true that most of those operations
may also have a negative impact in terms of employment, as well as in the surrounding environment, at
least in the short run. For that reason, it is important to accompany restructuring operations, to prevent
those likely to be affected from suffering from it. The Commission would like to remind that the Union
has developed throughout
the years a comprehensive policy for dealing adequately with the social
consequences of corporate restructuring, including mergers and take-overs. As a result of that on-going
policy, every restructuring operation must be preceded by effective information and consultation of
employees’ representatives with the aim of avoiding or attenuating its social impact, in accordance with
Community Directives on ‘Collective Redundancies’ (2),
‘European Works
Councils’ (4) and ‘Information and Consultation’ (5).

‘Transfers of Undertakings’ (3),

More generally, the Commission advocates the idea that companies should always take into account the
effects that their decisions can have on their employees as well as on the social and regional context. This
has
recently been underlined in the Commission Communication concerning Corporate Social
Responsibility (CSR) A business contribution to Sustainable Development (6).

Furthermore, the Commission invited the European social partners to engage in a dialogue on anticipating
and managing change with a view to apply a dynamic approach to the social aspects of corporate
restructuring. The social partners agreed to incorporate this issue in their pluriannual work program 2003-
2004. The Commission very much hopes that their joint work in this field results in a Community
framework which helps companies and their workers to successfully address the social dimension of
corporate restructuring.

(1)

For a general review of the evalutaion of mergers and acquisitions, see for instance the working paper No 243 by
Paul A. Pautler, Bureau of Economics, Tederal Trade Commission; it can be found on the Internet
http://www.ftc.gov/be/econwork.htm; see also http://www.ftc.gov/be/rt/mergerroundtable.htm.

(2) Council Directive 98/59/EC of 20 July 1998 on the approximation of the laws of the Member States relating to
collective redundancies. (This Directive consolidates Directives 75/129/EEC and 92/56/EEC) (cid:1) OJ L 225, 12.8.1998.
(3) Council Directive 2001/23/EC of 12 March 2001 on the approximation of the laws of the Member States relating
transfers of undertakings, businesses or parts of

to the safeguarding of employees’ rights in the event of
undertakings or businesses (cid:1) OJ L 82, 22.30.2001.

(4) Council Directive 94/45/EC of 22 September 1994 on the establishment of a European Works Council or a
procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of
informing and consulting employees (cid:1) OJ L 254, 30.9.1994.

(5) Directive 2002/14/EC of the European Parliament and of the Council of 11 March 2002 establishing a general

framework for informing and consulting employees in the European Community (cid:1) OJ L 80, 23.3.2002.

(6) COM(2002) 347 final.

(2003/C 280 E/167)

WRITTEN QUESTION E-1460/03

by Bárbara Dührkop Dührkop (PSE) to the Commission

Subject: The Comenius programme and intercultural education

(29 April 2003)

Will the Commission say how many projects on intercultural education and the schooling of children of
migrant workers, gypsies and itinerant workers have been undertaken under the Comenius programme
since 1997? Will it also provide a list of those projects and state the total amount of appropriations
earmarked for projects of this kind each year?

Answer given by Mrs Reding on behalf of the Commission

(11 June 2003)

When the Socrates I Programme was established in 1995, a specific action (Comenius Action 2) was set up
to promote intercultural education in schools. Annually, about EUR 5 million were provided in the
framework of action 2. The table below indicates the typology of approved project applications and the
grants earmarked for these projects for the years 1997-2000: