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Global Tips

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Employee Transfer Obligations of
M&A Deals

By Gareth Jarman

Mergers and acquisitions can create efficiencies and help companies expand into new markets. But businesses need to guard against the heady feeling that a potential merger can bring and be scrupulous about due diligence. Despite all the successes, studies have shown that 70% to 90% of acquisitions fail to live up to expectations.

Cross-border deals, which often involve venturing into a new setting with unfamiliar laws, languages, and customs, are tricky, especially when it comes to acquiring foreign employees. Many companies tend to overlook the differences, leading to wildly inaccurate budget forecasts or even litigation. This post explores some of the most significant HR aspects of cross-border deals to watch for.

Let’s start with asset deals (also often referred to as “carve-outs” or “spin-offs”), which are very different from stock deals, in which the entire legal entity is transferred. In an asset deal, only parts of the organization are transferred, and the assets may include not only physical and intellectual property but employees. You must ensure that a legal entity is in place when the deal goes through so the newly acquired employees can be registered with local tax authorities, and payroll and benefits can be set up on time.

Carve-out deals often include a transition services agreement (TSA), which allows the acquired company to continue providing payroll or other services for a set time after the transfer. If you intend to enter into one of these agreements, review it carefully before negotiations. It will help you get an idea of your costs to provide the same services once the transition ends.

If you’re in the United States, it’s highly likely that the country you’re moving to gives employees more rights than you’re used to seeing. The U.S. system of at-will employment, for example, gives employers the right to dismiss workers with no notice for almost any reason, and that system virtually does not exist outside the United States.

Read the full blog article here.



Garieth Jarman

Gareth Jarman is the Director of Radius’ HR Advisory Practice where he advises clients on issues related to global expansion and operations. His experience working in large, diverse business environments allows him to successfully assist organizations in adapting to commercial, technological, regulatory, and social changes. Based in the U.K., Gareth has degrees from Manchester Business School and Bournemouth University.