Although many buyers predominantly focus on the financial and commercial aspects of acquiring a business, a key aspect of any transaction that should not be overlooked is the employees that the buyer will inherit as part of the deal.
Businesses are built on people who are often its greatest asset, carrying operational knowledge, customer relationships and continuity, but there can also be skeletons in the closet and it’s vital that people risks are carefully assessed as part of the transaction to avoid unpleasant surprises post-completion.
In this series, we’re going to take a look at some of the common areas of employment-related risks that may arise during a mergers and acquisitions (M&A) transaction and how to approach them, starting with the TUPE process.
TUPE generally applies to asset purchases, not share shares, although it also has limited application in share sales. Where there is a transfer of assets amounting to 'an economic activity which retains its identity', those employees assigned to that economic activity will also transfer with it. In basic terms, this means that the affected employees become employed by the buyer from completion.
Click here to download our step-by-step guide to the TUPE process.
Buyers often inherit employees on different contractual terms to their existing workforce. Where the changes are beneficial to the employee, i.e. increased pay or holiday entitlement, changes can usually be implemented without issue.
However, in some cases, the buyer could be left in a situation where two employees doing the exact same job are on completely different terms. Long term, this is difficult to manage and can lead to dissatisfaction in some quarters. So how do you go about standardising terms?
Harmonisation for the purpose of standardisation alone is unlawful if the changes are transfer related. The employer must rely on a genuine economic, technical or organisational reason involving changes in the workforce as the reason for the changes.
Common approaches include:
Even then, employee consent is still required unless changes are mandated by law, and employees retain protection against having terms worsened.
Ashfords' employment team regularly advises employers during and after M&A transactions, assisting with the issues raised in this article series. If your business is involved in an M&A transaction and you need advice, please reach out to our employment team.
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