Human capital profile similarity as a sorting mechanism in mergers and acquisitions

Abstract Mergers and acquisitions transfer technology and the knowledge embodied in a target’s workforce, and in science-based settings often complete a transfer begun in a university or research organisation. While the role of acquisitions in accessing external knowledge is well documented, less is known about whether a target’s human-capital profile shapes which firms an acquirer pairs with, even though post-acquisition productivity depends on how well the two workforces align. Drawing on absorptive-capacity theory, we treat the similarity between an acquirer’s and a target’s human-capital profile, measured the year before the deal, as a proxy for the acquirer’s capacity to absorb the target’s knowledge. We build a firm-year panel of human-capital indicators from PitchBook and compare 188,716 realised merger and acquisition pairs, announced between 2006 and 2025, against plausible alternative targets. We find that acquirers systematically select targets whose human-capital profile resembles their own, with sorting positive across seven human-capital dimensions and strongest for education. The effect weakens across national borders and strengthens across industry boundaries, consistent with similarity reducing integration frictions in more complex deals. Merging to patent records, pre-deal human-capital similarity is positively associated with post-deal patent growth, though the association is weaker among acquirers that already patent. The findings show how human capital shapes the market for corporate control and offer practical guidance for screening acquisition targets, while noting that the same similarity that eases knowledge transfer also marks the workforces most exposed to post-deal redundancy.