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Issues to Consider With Existing Employees During a Merger

Coppaken Law Firm  Feb. 7, 2024

Mergers can be a huge step forward for your business, but a challenging time for existing employees. As a business law firm based in Overland Park, Kansas, we've seen countless businesses go through this process. We're here to share our insights on the critical issues to consider with existing employees during a merger. 

Managing Employee Morale 

It's natural for employee morale to drop during a merger or acquisition. After all, change can be unsettling and create a sense of uncertainty. But while that's natural, if those feelings of anxiety stick around too long, it can lead to decreased productivity and increased turnover. As an employer, it's important to acknowledge these feelings and address them head-on. Here are some strategies we suggest: 

  • Keep the decision-making circle small to prevent leaks. Imagine how a rumor the company is going under would affect employee morale. That's why it's essential to keep the decision-making process confidential between key stakeholders. 

  • Address rumors head-on, acknowledge the uncertainty, and listen to employee concerns. Ignoring or denying rumors can lead to further distrust among employees. Instead, have a transparent conversation and be open to hearing their concerns. 

  • Consistently communicate clear and unified leadership messages to manage expectations. Clear and consistent communication is key to managing employee morale. Ensure that all leaders are on the same page and are communicating the same information. 

  • Be honest when handling sensitive issues to build trust among employees. During a merger, there may be tough decisions that need to be made. It's crucial to be transparent and honest with employees about these decisions to maintain their trust. 

Communication and Engagement 

Communication is the backbone of a smooth transition during a merger. It's not just about delivering messages, but also about engaging in meaningful dialogues with our employees. Here are some strategies we've found useful: 

  • Create a roadmap that outlines significant events and communications throughout the merger process. 

  • Implement two-way communication to address different employee groups and answer their questions. 

  • Provide clear guidance on the new organizational structure, reporting lines, and processes. 

  • Engage in one-on-one discussions with key employees about their future roles. 

Job Losses and Redundancies 

Mergers can sometimes lead to job losses due to overlapping functions. It's a sensitive subject that requires careful handling: 

  • Identify overlapping positions and departments and plan for the transition. 

  • Communicate potential staff reductions in advance and provide support for affected employees. 

  • Help remaining employees adjust to the new environment by facilitating communication and addressing cultural differences. 

By doing these, we can mitigate the negative impact of job losses and redundancies and ease our employees' transition into the new organization. 

Employee Benefits and Retirement Plans 

Employee benefits and retirement plans are critical aspects to consider during a merger. Here's what we recommend: 

  • Ensure compliance with the Employee Retirement Income Security Act (ERISA) to protect retirement benefits. 

  • Evaluate the transfer of existing retirement plans and consider its impact on employees. 

  • Consider offering new stock options or other benefits to motivate and reward employees. 

  • Inform employees about potential stock price appreciation and capital gains resulting from the merger. 

M&A Strategies We Recommend as Attorneys

At Coppaken Law Firm, we've seen the good, the bad, and the ugly when it comes to mergers and acquisitions. From our experience, here are some strategies we recommend for a smooth transition: 

  • Consider the legal aspects of employee retention well in advance. It's not uncommon for mergers to result in redundancies, which can lead to legal issues if subsequent terminations are not handled correctly. Consult with your legal team to strategize retention and severance packages that both comply with labor laws and respect employees' rights. 

  • Review non-compete and non-disclosure agreements. In a merger, preserving intellectual property and trade secrets is critical. Ensure all employees understand their obligations under any existing non-compete or non-disclosure agreements, and consider implementing new ones if necessary. 

  • Organize workshops on legal rights and obligations. Knowledge can alleviate fear. Offering workshops or seminars led by legal experts can help employees understand their rights, the merger process, and their role in it, allaying concerns and promoting transparency. 

  • Implement a legally sound integration plan. A merger is more than a financial transaction; it's a delicate process of integrating two distinct work cultures. Develop an integration plan that not only complies with labor laws but also considers the cultural aspects of the merging companies to facilitate a smoother transition. 

How a Business Lawyer Can Help

Navigating through a merger can be complex, especially when it involves existing employees. A business lawyer can provide valuable guidance and support in areas such as: 

  • Understanding labor laws and compliance requirements

  • Drafting and reviewing employment agreements, non-compete and non-disclosure agreements, and severance packages

  • Developing an integration plan that considers legal aspects and cultural differences between the merging companies

  • Facilitating communication and addressing employee concerns during the transition process 

In conclusion, while mergers can be challenging for existing employees, careful consideration of these issues can help mitigate their impact. By being transparent, proactive, and seeking legal guidance when necessary, you can ensure a smoother transition for both your business and your employees.  

By addressing these issues, businesses can ease the transition process while minimizing disruptions and maximizing employee engagement and satisfaction. It's a challenging time, but with the right approach, we can turn it into an opportunity for growth and development.  

Contact our firm in Overland Park, Kansas, to set up a consultation, and learn how we can make your company's next chapter one that's riddled with success, growth, and innovation.