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Addressing redundant positions during a merger or acquisition

On Behalf of | Apr 26, 2024 | Business Transactions

Acquisitions and mergers are complex business transactions that can yield substantial benefits for the organizations involved. An acquisition can help an inventor or entrepreneur monetize groundbreaking concepts. These transactions can help companies grow by providing access to intellectual property, valuable talent and other business resources.

Mergers and acquisitions can be very difficult to plan, as they require inter-company coordination and a thorough evaluation of the circumstances at each business. The process of combining two companies inevitably leads to issues with redundancy. There may be more accounting or human resources workers at the combined final organization than the business actually requires. Addressing redundancies necessitates careful planning to avoid organizational liability.

Staff reductions require careful consideration

The decision to downsize by eliminating certain positions or entire departments can lead to numerous people feeling angry toward or betrayed by a business that previously employed them. Those workers might sometimes attempt to take legal action either in pursuit of financial compensation or to demand their jobs back.

Workers might claim wrongful termination or discrimination after getting let go as part of a downsizing effort during a merger or acquisition. It is therefore incumbent upon those planning mergers and acquisitions to be very precise when preparing to let workers go.

Performing an in-depth analysis of the people considered for retention versus termination and establishing clear standards to guide employment decisions can help avoid scenarios in which personal bias affects the outcome of these key decisions.

Investing in a thorough secondary check to review the decisions made before finalizing and announcing them can also be important. Having a second manager or human resources professional evaluate the list of workers selected for elimination when addressing redundancy could help identify trends that could lead to questions about discrimination.

If all of the workers let go are in a certain age bracket or if a certain race has disproportionate representation, that could raise questions about what factors the company considered when making employment decisions. Catching those trends before finalizing decisions can reduce the likelihood of a lawsuit later.

Properly addressing employment liability concerns is a crucial element of a successful merger or acquisition. Executives and owners who recognize the most challenging components of an upcoming business transaction – and who seek legal guidance accordingly – can potentially avoid common pitfalls that can cause financial setbacks or legal disputes.