For someone starting a business, an acquisition is one of the best things that can happen. It usually means a company has gained enough traction to get noticed by someone much bigger and more successful. But the business being bought is likely stocked with its own team of employees, and each will immediately start worrying about what will happen to their own jobs. In some cases, employees are let go, but in many others, they’re merged into the new company or allowed to remain with the previous company under new owners.
Company Acquisition and Employees
At a business undergoing an acquisition, it’s important for employees to maintain calm. Employees will understandably be concerned, and their concerns aren’t unwarranted. Approximately 30 percent of workers are deemed redundant after a business is purchased when both companies are in the same industry.
But that statistic doesn’t necessarily mean any of your employees are at risk of hitting the unemployment line. Even if you later need to cut back, those workers could be shifted into other positions within the company. Either way, employees aren’t helpless as they wait to see what happens next.
Immediately Following Acquisition
After the initial announcement of a company acquisition, there’s generally a period of silence. It may seem during this time that nothing is happening, but there’s plenty of hard work going on behind the scenes. The buyer should dig into the company’s books and make some serious decisions about how to move forward.
During this quiet period, it’s important for the leadership team to keep the lines of communication open with employees, who will likely be nervous. If possible, have the acquiring business meet with employees to answer questions. Employees can help ensure their own positions within the new business structure by working hard and showing up at meetings to get the information they need.
Buyers and Payroll Expenses
When one company buys another company, employee acquisition generally isn’t the top concern. The acquiring company is generally focused on growing its portfolio, and existing employees show up as a fairly large line item on the company’s monthly expenses. If the buyer sees that the budget needs to be trimmed, payroll expenses are only one of many ways that can be accomplished.
What an acquiring business is most worried about is waste. If two businesses have fully staffed accounting teams and they merge into one, someone at the top will look at a way to streamline the team, which may mean some layoffs. While it might be assumed that the buying company will go with its own employees, the smaller business’s team may have some people who are more qualified, or the buying business may have underperforming employees who were on their way out even before the acquisition.
Different Buyout Types
Before a business automatically assumes there will be any change at all to employees after merger, it’s important to note that not all buyouts are equal. In some cases, one business buys another simply to grow its own financial portfolio. The purchased company will remain in place, allowed to operate exactly as it did before.
However, in many other cases, a few things merge while others remain the same. Your web development company may have been bought by a media company, for instance, because it sees the need to move into internet-based offerings. The buying company is interested in leveraging the expertise of your tech teams, so they’ll likely be safe, but supporting staff like management and HR may have reason for concern.
What Employees Can Do
If layoffs do happen, they’ll likely target redundant workers. So one proactive thing employees can do is try to reduce the risk that they’ll be seen that way. In some cases, the acquiring company will sit down with each employee and discuss current work responsibilities. This is the chance for employees to stress any specialized skills that set them apart from others in their field.
Although employees will understandably be distracted, it’s important to stress the importance of continuing business as usual. The business will be under a microscope in the early days, so that isn’t the time to have the lowest sales ever or fall behind on administrative tasks like sending invoices and paying bills.
Issues Leaders Face
In addition to morale issues associated with fear and uncertainty, management will also face challenges when it comes to implementing change. Employees who have gotten used to working a certain way may push back against new processes or technologies. Even something as simple as a change to the way time sheets are submitted can bring complaints from employees who are already stressed.
Good leaders know how to set a good example during upheaval, primarily by remaining calm and continuing to work hard. They also see the signs of dropping morale and work to address it on a person-by-person basis. If an employee feels overwhelmed by the new software the team is being asked to use, for example, it might be worth looking into training options to get everyone up to speed.
Changes in Personnel
In an employee acquisition, executive management often comes under fire. A business’s top leaders, including the CEO, will usually be eliminated or absorbed into the management team at the new business. For employees, this can be a tricky time as they try to determine what will be expected of them during and after the transition.
Leadership isn’t the only way personnel changes will affect your employees. If the new leadership eliminates some positions, the remaining personnel will be left to handle the work the departing workers used to do. Whether layoffs happen or not, teams may find it tough to learn new processes and merge with other employees who have been working with the parent company for years.
Changes to Benefits
In addition to changes in leadership and operations, employees after mergers or acquisitions often see their benefits change. No business wants to maintain two separate healthcare and retirement plan structures, and generally the acquiring company will choose. You’ll probably have a company-wide meeting or phone call to explain the new benefits, as well as a special enrollment for all the employees coming over from the purchased company.
However, employees with the company being acquired will understandably have concerns about the benefits they’ve already accrued. Employees with pensions, for instance, will be concerned about losing the credit they’ve put toward retirement, but the Employee Retirement Income Security Act will provide protection for that. The acquiring business should work hard to make sure all employees are satisfied, because positive morale is in the best interest of the company as a whole.
What Happens to Stock Options?
For employees who hold stock options, a company acquisition brings even more questions. When stock options are issued, they come with a vesting schedule, which ensures you stay with the company a specific amount of time to earn the right to purchase those shares. If an employee holds options, that means those shares aren’t vested yet, so the acquirer could cancel the options or speed up the vesting process so that employees are paid and the debt is settled.
For vested shares, the acquiring company can either pay the amount in cash or substitute the shares in the old company with new shares. The latter benefits the new company because it strengthens its shareholders. If the acquiring company hasn’t yet gone public, the new shares could also be of greater value down the road than the shares in the previous company.
Losing Remaining Employees
With any employee acquisition, leaders with both the acquirer and the acquiree must worry about losing employees through resignations and retirement. It’s not unusual for a few top-performing workers to leave during a merger or acquisition, even if they know for certain their jobs are safe.
There are a few reasons a business’s best employees may consider leaving:
- Poor communication
- Loss of treasured team members
- Loyalty to terminated supervisors
- Uncertainty about status in the new organization
- Resistance to change
If you have long-term employees who are eligible for retirement, you may see that the change that comes from an acquisition pushes them to make the leap. For them, it’s easier to retire now than to put all the work into learning new processes, only to retire in a few years.
Screenings and Vetting
After merger or acquisition activity, employees may have to go through a qualification process. The new company may have stricter hiring practices than the smaller business, especially if it’s an early or midstage startup. This could include having every employee go through the interview process or, at the very least, submit a resume for the acquiring company to keep on file.
Interviewing may not be the only concern, though. Some companies background screen each employee during the hiring phase, especially if they’re in a situation where they’re going into customers’ homes. Whether you were given one when you were hired or not, you may be required to undergo both a background check and a drug screening – so make sure you’re prepared for that.
Signs a Layoff Is Looming
The environment post-acquisition can be tense, as workers wait to see if their jobs are on the chopping block. Although the acquiring company will likely want to get everything in line before making cuts, it’s important not to drag it out so long that it drops morale. Employees should try to avoid spending so much time stressing about it that they let it affect they're overall well-being.
There are some surefire signs that layoffs are looming. Of course, the biggest one is the acquisition itself and the fact that the acquiring business is taking an in-depth look at operations. However, if a team is about to undergo massive layoffs, executives can tend to neglect those areas of the business, even shifting some of the work over to other employees. If the manager of a team is laid off or relocated and the team beneath that person gets no guidance, that could also make those employees anxious.
Moving on After Termination
For some employees, an acquisition may mean the end of the road with that business. If you’re one of the unfortunate few, you may find that you’re faced with some very crucial decisions. It’s important to carefully review any letter you’re asked to sign and, if necessary, consult an attorney. This is especially vital if the letter inhibits your ability to work for a competitor.
During a company acquisition, you may find you’re offered a severance package that will help offset the income loss for a while. Take a deep breath, rest for a few days if you prefer, then think through what you want to do next. Once you’ve drawn up a plan, reach out within your network and let people know you’re looking for a new job. You may be able to work as an independent contractor until you line up something permanent.
