Post-merger restructuring and the boundaries of the firm

We examine how firms redraw their boundaries after acquisitions using plant-level data. We find that there is extensive restructuring in a short period following mergers and full-firm acquisitions. Acquirers of full firms sell 27% and close 19% of the plants of target firms within three years of the acquisition. Acquirers with skill in running their peripheral divisions tend to retain more acquired plants. Retained plants increase in productivity whereas sold plants do not. These results suggest that acquirers restructure targets in ways that exploit their comparative advantage. ► We examine plant-level restructuring after mergers and acquisitions. ► Acquirers of full firms sell 27% and close 19% of the target-firm plants. ► Skilled acquirers retain more target plants, increasing productivity of these plants. ► Firms restructure targets to exploit their comparative advantage across industries.