Beyond the Deal: Navigating M&A with the Employees in Mind

Posted by Bray Dohrwardt | Apr 10, 2024 | 0 Comments

Buying a company can be exciting and challenging, but it's important to remember that it's not just about the financials. When acquiring a company, you also take over its employees, which can come with various legal considerations. Numerous considerations can lead to significant issues if improperly managed. Below are some essential legal concerns related to employees when buying a company. Contact the Dohrwardt Law Firm to discuss how the firm can help you with your acquisition and integration efforts.

Employment contracts: Reviewing the employment contracts of the target company is essential to understand the terms and conditions of employment, including compensation, benefits, and other obligations. This is important to ensure no surprises after the acquisition and to plan for integration, including marrying various company cultures and any planned restructuring or layoffs.

Employee benefits and entitlements: Employee benefits and entitlements, such as vacation days, sick leave, pensions, and health insurance, are also essential to consider. Business owners should review the target company's benefit plans to ensure compliance with applicable laws and regulations and to plan for any necessary changes. Acquiring companies should also review where conflicts may exist. For example, suppose vacation and sick leave entitlements are far more generous than the purchasing company's. In that case, there can be significant issues when integrating new employees into an existing culture. If not properly understood and planned for, the acquiring company may struggle with substantial turnover and lost institutional knowledge as just one consequence.  

Employee liabilities: Employee liabilities, such as unpaid wages, taxes, vacation entitlement balances, or workers' compensation claims, can be a significant financial burden. Business owners should conduct thorough due diligence to identify potential employee liabilities and plan accordingly.

Collective agreements and unions: The new owner must assume these obligations if the target company has unionized employees or is a party to a collective agreement. This may require negotiations with the union or reviewing the collective agreement to ensure compliance with applicable laws and regulations. If the acquiring company has yet to experience unions, the company will need to come up to speed very quickly to ensure the relationships are properly managed.

Compliance with laws and regulations: Business owners need to ensure that the target company complies with applicable laws and regulations related to employment, such as labor standards, human rights, and health and safety. Failing to abide by these laws and regulations can result in significant liability and reputational damage.

In conclusion, legal considerations related to employees are essential to buying a company. Business owners should review the employment contracts, benefits plans, and potential liabilities of the target company and ensure compliance with applicable laws and regulations. By doing so, business owners can plan for possible changes and avoid surprises after the acquisition. Contact the Dohrwardt Law Firm to discuss how the firm can help you navigate these issues with confidence.

The information provided is only for general information and is not meant to be legal advice. Information on this website, including third-party links, may be less up-to-date, so you should contact your attorney to discuss your situation. Third-party links are provided for convenience only and are not an endorsement by the Dohrwardt Law Firm.

About the Author

Bray Dohrwardt

As an accomplished attorney with over 22 years of experience, Bray Dohrwardt has built an impressive career, enabling business growth and commercial success for many companies from start-ups to large corporations and nonprofits. He focuses his practice on business law and energy law.


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Bray Dohrwardt is licensed to practice law in Minnesota and Texas. Please contact the Dohrwardt Law Firm to discuss how the firm can help you get business done.