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In 1997 as the jobless rate hovers below 5% nationally and sometimes at 3% in some places, the scarcity factor for top talent is getting serious. In an economy with ever-tighter labor markets such as this, some merger and-acquisition deals are being driven for quick access to scarce talent. As start-ups proliferate, executive talent is harder to find. And as the pace of change accelerates and teams become the device of choice for product development, more and more companies may decide to apply the "buy vs. build" concept to "buying" teams of people.

Mostly small high-tech companies are on top of this trend. Some are acquiring bankrupt companies mostly for hard to find engineers and programmers. Some of these buyers are not at all interested in product lines, plants, equipment or real estate, merely human talent.

"Acquisitions are going to be an alternative to normal recruiting that people really haven't considered before," says James O'Donnell, a Coopers & Lybrand partner in Minneapolis." As the economy continues to boom and as talent gets harder and harder to find, it's increasingly important to acquire the talent."

Once the purchase is made, buyers are trying much harder to hang onto the acquired staffers. They see more "golden handcuff" contracts and more lures of lucrative stock options, a big change from years ago when buyers often swept out the former managers and installed their own.

Historically, in fields such as management consulting or temporary staffing, acquisitions have long been done largely for the people. For many merger-and-acquisition specialists though, the question is whether work force driven combinations are likely to spread beyond the chronically labor-short world of high tech and its related fields. Experts respond that teams of specialists are in short supply across a variety of industries and occupations, from mechanics to customer-service representatives to large telemarketing teams.

Despite all these factors, lots of mergers and acquisitions are still driven by geographic expansion, a quest for market dominance, and many are still driven by the opportunity to eliminate duplication, resulting in payroll cuts and lost jobs.

 

 

-- Posted the week of October 7, 1997

Source: The Wall Street Journal The Outlook October 6, 1997 pg. A1