Human Resources Involvement in Mergers and Acquisitions

I’ve participated in a number of merger and acquisition transactions throughout my career. Dealing with an M&A is one of the most challenging undertakings you will ever take on, and if you have ever been involved in one, you know I’m not exaggerating. The work you undertake in conducting due diligence for your employer might possibly make or break a profitable contract, regardless of whether you are a business owner or an HR professional assigned to a project team.

The Role of Employee and Labor Relations in M&A

Contrary to popular belief, labor relations is one area in M&A that typically receives less consideration than is appropriate. I’m not sure why this is the case, but I keep witnessing it, especially in situations where a collective bargaining agreement is already in place. People seem to assume that the current collective bargaining agreement covers all of that “union stuff.” Nothing could be further from the truth than such thinking. The existence of a labor agreement or the involvement of a labor union in the organizing process at a company you are considering should immediately raise caution flags. Here are a few justifications for why you should give labor relations concerns the correct amount of consideration.

Hidden Costs & Collective Bargaining Agreements

The salary, benefits, and other terms and conditions now in effect are explicitly outlined in an existing collective bargaining agreement for any prospective new employer. These can only be changed by an acquiring business after entering into and carrying out good faith negotiations. This may need the maintenance of separate wage and benefit plans for an extended period of time, among other administrative integration challenges for your acquisition. There are also many  hidden costs and continuing long term obligations that are easily overlooked, such as the requirement for future contract negotiations and joint multi-employer pension plan withdrawal liability issues.  Even things like the hiring of new or existing staff can become complex and costly if not done correctly.  The NLRB just ordered a California business to add fifty staff members and begin bargaining with a union, in what appears to be a case of lax due diligence by the new owner.

M&A Business Resources

Here are a couple of useful resources for HR professionals who may be involved in upcoming merger and acquisition activity.

• A labor lawyer’s guide to avoiding the surprise withdrawal liability assessment

• Merger & Acquisition checklist from SHRM

• M&A checklist for small business