"In the business sector, you acquire firm-specific knowledge, which means a career interruption can be very costly".
They acquire firms outright.
The resulting spillover effect of corporate taxation on the manager's acquisition of firm-specific skills can be summarized as follows: An increase in the corporate tax rate reduces managerial effort to acquire firm-specific skills.
Similarly, there is often a sense of reciprocity between workers and employers where workers understand that if they work hard in their younger years and acquire firm-specific skills, their employer will keep them on the payroll in their older years when they may not be as productive.
The acquiring firm is then called a holding company.
To succeed it is not enough to run the acquired firm well.
Academic studies of all of the big merger waves of this century have shown clearly that, although shareholders of acquired firms have tended to benefit, those in the acquiring firm have lost.
The "winner's curse" describes the phenomenon of mergers destroying value for the shareholders of an acquiring firm.
The most important term that must be negotiated in a combination is the price the acquiring firm will pay for the assets it takes over.
Among the problems for an acquiring firm: taking on so many lawyers at once would not only be cumbersome, but also potentially alienate its own partners.
An acquired firm must follow hard rules, such as supplying financial information ("joining GE is like taking a drink from a fire hose" is one complaint).
