Employee Sensemaking in Mergers: How Deal Characteristics Shape Employee Attitudes

This experimental study examines how employees make sense of a merger announcement and investigates the relationship between deal characteristics (culture clash potential, degree of integration, position in deal structure) and employee attitudes. A sensemaking mechanism is proposed and tested on graduate students subjected to merger scenarios. As employees make sense of the merger, higher perceived uncertainty is associated with greater dysfunctional outcomes. Although perceived uncertainty mediates the effect of perceived cultural similarity on employee attitudes, this is not so for perceived power. An employee’s position in the deal structure strongly influences perceived power, but unexpectedly, higher perceived power does not reduce uncertainty. Still, greater perceived power is directly associated with lower intention to leave and greater satisfaction. Although the degree of integration did not affect any of the outcome variables directly, complex interaction effects were found. Complementary qualitative data analysis sheds light on how employees make sense of the deal.