After completion: the practical issues

Acquisitions are never easy. There are many details and moving parts during the sale process, from heads of term to completion, whether it’s a business transfer or a sale of shares.

Getting acquisitions right on the people side is absolutely critical to an organisation’s success after the deal – staff are a key asset in most businesses. Integrating and aligning two businesses and their cultures may seem daunting, but putting the key elements in place early during the sale process sets a transparent, collaborative and inspiring tone for the journey. After all, future success will depend on key players remaining and continuing to perform following the completion date.

Here we look at the legalities involved in a business change, and how companies can use the time before transfer to prepare for a smooth transition.

Transferring the workforce

The lead time to completion in a sale will vary depending whether it is a share sale or full business and asset transfer. Either way, however, the essential first step for all parties in bringing people together post-completion is understanding the impact on the workforce. There’s a lot of disruption and uncertainty for employees on both sides, but especially within the acquired company. In both cases, communication is essential, but the timing will vary depending on the type of transaction.

In a business sale, the Transfer of Undertakings (Protection of Employment) Regulations 2006 (“TUPE”) will apply where there are affected employees. TUPE provides protection when ownership changes: employees’ terms and conditions are preserved, along with their continuity of employment.

Where TUPE applies, the current (transferor) and new (transferee) employers must inform and consult with affected staff. While there is no statutory timescale, this needs to be done in sufficient time ahead of the transfer date. The whole workforce will therefore be aware of the transfer weeks before completion. This is a key opportunity for both parties to work together to inform staff and provide reassurance on the impact on them.

While TUPE does not apply to a share transfer, it could apply to an asset transfer carried out as a precursor to a share sale, or a transfer of the business or part of it to the holding company following a share transfer.

Communication priorities

There can be wider issues to consider, such as proposed redundancies or changes to employment following the sale. Even where these are not planned, employees (in both companies involved) will want to know about the practical aspects: where they will be based, who their team will be, how they will be integrated, will systems be different etc. These concerns may not seem the priority for either company, but are typically key for the staff on the ground, and the future of the new organisation will depend on them being engaged and feeling valued during and after a transaction.

In a share transfer the lead-up is usually highly pressured and highly confidential, with both parties wanting to inform only those directly involved in the transaction. The wider workforce will likely only be told of a change in ownership after completion, but again, communication with staff will be key, both before and after completion. During due diligence, the seller will want to identify their key talent who will be actively involved in that process, ensuring they are not only engaged in aiding the process (a key element to a sale) but still feel invested in the business beyond completion.

The buyer will want to meet these key individuals during this stage and ensure they feel committed to the future of the organisation post-completion. Parties should also plan what will be communicated to the wider staff about the deal and their role in the “new” company, and how that will be presented – whether at an all staff townhall or via smaller meetings. Practically, once the deal has closed, the parties will want to deal with staff communications within 24 hours.

After completion

The next stages will likely be around ensuring that the cultures and values of the “new” (combined) company and its staff are aligned. This might be through formal sounding boards, social events or specific training to ensure everyone has an understanding of where the company is post-deal, what the future looks like and what its values are. This is also an opportunity to update any relevant policies and processes to ensure continuity in the combined workforces of the buyer and seller. Although in a business and asset transfer TUPE protects employees from changes to their terms and conditions, if any proposed changes were identified during consultation they must be implemented now.

Ultimately, the difficulty – or otherwise – of integrating the new workforce will largely depend on efforts and planning during the run-up to completion. If details of the transaction have to remain confidential, a plan should still be considered key by the senior management and board of both buyer and seller to ensure their entire workforce continue to feel valued and connected to the new organisation, with an understanding that there may be bumps in the road but that the journey should be worth it.