Maximizing The Value of Your M&A Deal – Don’t Forget These Two Issues

Putting together your M&A PuzzleOne avenue for companies to grow is through mergers and
acquisitions (M&A). The structure for any M&A deal will vary. However,
central to any M&A strategy are implementing best practices to optimize the
employee side of M&A.

M&A options broadly range from a merger (two companies
combining to form a new company or one company taking over the other) and an asset
purchase (i.e., only certain assets of the seller are purchased). Within this broad
and oversimplified spectrum are various strategic considerations.

One constant for a successful M&A is properly handling
employee transition issues. Here the goal is to optimize the employee side of
the M&A deal. An article in the Harvard Business Review (After a Merger, Don’t Let “Us vs. Them” Thinking Ruin the Company, by Jennifer Fondrevay) notes

A workforce can feel blindsided when a deal is announced, eroding
trust and transparency in three mutually reinforcing ways:“our”
company versus “their” company;
versus frontline employees; [and] who
stays versus who goes.

While these HR/employee cultural issues are important, it is
equally critical to address basic “nuts and bolts” employment issues. And two
such issues are employment compliance issues and non-compete restrictions. When
we work with business owners in acquisition matters, we will focus on these
issues early in the due diligence process. The goal is to identify the “good,
the bad and the ugly,” in terms of issues that
may affect the value of the deal.

For example, a history of or uncovering potential EEOC
charges or employment law claims often point to compliance or management

Or it is a significant problem if the target company has not
properly protected itself from wrongful competition by employees. This is
because key-employees, often sales or developers, may not stick around after
the M&A deal is completed. There is only one scenario worse than having a
M&A deal immediately take a hit because your anticipated “rock star”
employees don’t stick around: those same employees leave to start or join a

For more information about maximizing the value of your next
M&A deal, contact our law firm. We routinely collaborate with business
owners in asset purchase and merger transactions, with a focus in HR compliance
and employment matters affecting the value of a deal.