Workforce Integration and the Dissipation of Value in Mergers: The Case of USAir's Acquisition of Piedmont Aviation.

In November 1987, USAir Group acquired Piedmont Aviation for $1.6 billion in cash tender offer. Following the acquisition of the two carriers, the new USAir incurred huge operating losses, became the last profitable major airline, sustained a large reduction in its stock price, eliminated its dividend, and came close to bankruptcy. We examine USAir's acquisition of piedmont and its post-merger performance to address the following question -- how can the combination of two highly profitable firms dissipate so much value?