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This study draws on strategic factor market theory and argues that acquirers' decisions regarding whether to bid for a firm reflect their expectations about employee departure from the firm post-acquisition, suggesting a negative relationship between the anticipated employee departure from a firm and the likelihood of the firm becoming an acquisition target. Using a natural experiment and a difference-in-differences approach, we find causal evidence that constraints on employee mobility raise the likelihood of a firm becoming an acquisition target. The causal effect is stronger when a firm employs more knowledge workers in its workforce and when it faces greater in-state competition; by contrast, the effect is weaker when a firm is protected by a stronger intellectual property regime that mitigates the consequences of employee mobility
