What happens to employees during a merger? Avoiding M&A employment issues

Consulting Global Employment and Mobility

By Rachel Twining
April 29, 2019

March 29, 2021

0 min read

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Mergers and acquisitions (M&A) activity is on the up, bringing challenges, not least in understanding what happens to employees during a merger.

M&A often means restructuring management teams, relocating staff and consolidating service providers. In 2016, Air Energi and Swift Worldwide Resources combined to create Airswift, giving first-hand experience on how M&A can affect a company from a global mobility standpoint.

  1. Ownership and local content rules

Both sides of the merger most likely have spent time ensuring compliance with jurisdictions’ varied ownership and local content rules.

HR professionals should begin by:

  • Collating copies of existing employment agreements across the two original companies
  • Map employees according to nationality
  • Understand employees’ tenure, current permit and visa status
  • Use the above to identify and flag potential issues

With all this information, workforce professionals can make informed decisions.

  1. When and how to involve HR

The sooner HR is involved, the better. HR teams can provide oversight into the new structures such as the relocation of people, compliance with local regulation and providing employees with the necessary support

HR professionals aid recruitment, handle employment packages and severance payments or country payments triggered by moves and can guide on the best time to move based on local regulations. The US’s IRS, for example, now counts moving expenses as salary payments for tax purposes.

M&A events don’t fit neatly into the financial year; creating more planning challenges for HR and finance teams in terms of tax and immigration status.

  1. Managing third parties

Companies involved in the M&A activity most likely have a network of vendors, suppliers and partners for various services. Consolidating this list will be high on the new company’s priority list as it is a financial drain to run systems in parallel, and can lead to things falling between the gaps.

It’s important to get started early – vendor contracts typically feature long notice periods and heavy penalties, making the transition to a single vendor a six to twelve months process.

Though it may seem counterintuitive to bring more parties to the table at a time of consolidation, one new partner could be key: a workforce solutions provider specialising in global mobility. This partner can manage the complexities.

Whether engaging a third party to help manage the period of change or not, M&A events are difficult times from an HR and global mobility perspective.

We understand this challenge from our work for clients and our own merger experience. The core element of M&A success boils down to one point: create cross functional groups in every area upfront and early on, and allow them to fully focus on the change, without additional day-to-day responsibilities.

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