When companies join forces with one another through a merger and acquisition transaction, employees could be left feeling uneasy. It’s totally clear what you mean. When companies merge, big changes often happen. It’s understandable to be afraid of losing your job, your perks, or the way things are done at your current company. This leaves employees wondering, what happens to employees during mergers and acquisitions? This is when to seek the help of a Fresno mergers and acquisitions lawyer.
Mergers And Acquisitions
When two businesses join together to make a new one, this is called a merger. In most cases, both companies merging are about the same size and strength but may be competitors of one another, or one is a beneficiary of the products and goods of the other.
While a merger joins the two companies, unless an agreement is made, the merger will result in one company acquiring the other and often buying the rights to the company outright from its ownership in what is called an acquisition. The target company is taken over by the acquiring business and no longer exists as a separate entity. The business that merges or buys another may decide to streamline its operations, which can have a big impact on the people who work there.
What Happens to the Employees
Most of the time, these transactions create fear of job loss or other significant impacts on the wages earned or the responsibilities placed on workers. Sadly, layoffs are almost certain to happen, particularly for employees who are a part of the acquired business. Some mergers and acquisitions may cause little trouble, but many will cause change that could have significant impacts on the size or retention of the workforce.
For instance, if each company had its own management team, there would be no need for two CEOs, CFOs, or other top executives. Upper management may be negotiated as a part of the transaction, but in some cases, those in upper management from the acquired company may find themselves updating their resume.
People at all levels, not just the top ones, can be at risk of losing their jobs. There may be job overlap for mid-level managers, office staff, and even operational workers in the company that buys the other one, which could mean more layoffs. Ultimately, the decisions in how the company will function jointly after a merger could determine many of the decisions that impact employees.
Additional Changes for Workers
Even if you make it through the first round of layoffs, things are likely to change significantly. An employee’s daily work and surroundings are likely to change in a number of ways. People can expect changes in the following areas:
- Changes in staff and jobs. Staff will change, which is one of the first changes employees notice. This could mean getting used to new leadership, such as a new CEO or a whole new way of business operations. An employee might be taking on more work, picking up jobs from former coworkers, or getting used to how the team works now. Sometimes it’s hard to get used to dealing with new people and new methods, but that’s just part of the process.
- Changes to the benefits. One more big change of a merger or acquisition is that an employee’s benefits might change. It usually doesn’t make financial sense to keep two different health, retirement, or other benefit plans when two companies merge. Many people who used to work for the target company are afraid they will lose perks like pensions and 401(k) plans.
- Clashes of culture. Each business has its own culture, and it can be hard for two businesses to combine their cultures when they join. What was once a comfortable and familiar place of work can quickly feel strange. People can feel lost when there are new rules, different ways of talking to each other, or a change in the tone of leadership. It can be hard to get used to this new society, but being flexible and open-minded can help.
- Changes to stock options. Mergers and acquisitions can be hard to understand if someone has stock options in the company. People who have stock options that haven’t yet vested could get rid of them or, in some cases, get them sooner. If a person’s shares have value, the company that buys them may buy them back or give them shares in the new company. Again, it’s important to communicate this clearly to employees.
These are just a few of the many ways that employees can be impacted by merger and acquisition transactions. However, many of these impacts are done without the knowledge of the employee and are not revealed until after the transaction has been finalized.
FAQs
Q: How Do Mergers And Acquisitions Affect Employees?
A: Employees frequently experience major changes as a result of mergers and acquisitions, such as possible job loss, role changes, and adjustments to benefits like health care or retirement plans. Workers may also experience changes to their work settings, new leadership, and conflicts between cultures. These changes may cause difficulty and uncertainty surrounding these transfers.
Q: What Are The Employee Rights In Mergers And Acquisitions?
A: When a merger and acquisition occurs, the rights of the employees usually rest on their contracts and the laws in their area. Employees should look over their job contracts, especially the parts that talk about benefits, severance packages, and not being able to work for anyone else. Staying aware is important because workers can protect themselves by knowing their rights or going to court if they are treated unfairly.
Q: What Happens to HR During a Merger?
A: During a merger, human resources (HR) is very important because they oversee the integration of the two companies’ policies, wages, and benefits. HR is also in charge of layoffs, telling workers about changes, and keeping morale up during the workday. They are often in charge of integrating different cultures and making sure that labor laws are followed. This makes them very important to the success of the merger’s workforce shift.
Q: Why Do Employees Leave After a Merger?
A: People often leave after a merger because they don’t know what will happen next, they are displeased with new leadership, or they don’t like their job anymore. They might not feel connected to the new company, their jobs might change, or they might lose faith in the group. Fear of more layoffs or changes that will hurt perks and job security may also make workers look for work elsewhere where they can find more stability and happiness.
Contact Fishman, Larsen & Callister Today
Mergers and acquisitions can be a complicated process for all involved. For employees who are left to wait until the dust of the transaction settles, it can be a stressful and anxious time. However, an employment law attorney can help ensure that your rights are protected after the deal is done. If you have questions about how you could be impacted by a mergers and acquisitions deal, Let Fishman, Larsen & Callister help. Contact us today.