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HR project management for mergers and acquisitions

HR Management in the course of Merger & Acquistion

Not only the merger of two companies, but also the divestment of company shares can have a huge influence on the economic future of a company. Still, in many transactions involving Mergers & Acquisitions (M&A), HR Management does not take centre stage. Yet, for the subsequent integration to be successful, Personnel Management is of paramount importance. The rule of thumb is: the more the acquisition is to be integrated into one's own company later on, the more carefully the HR strategy has to be planned.


M&A transactions a challenge for Human Resources

Frequently, tax considerations are decisive in the transaction structure of Mergers & Acquisitions. Personnel Management is usually involved very late in the takeover or selling process. In many cases HR Management is faced with the challenge of having to negotiate under extreme time pressure. Frequently, Works Councils or Labour Unions are insufficiently involved or there is no time for Change Management. Also not uncommon is too tight scheduling of resources for Mergers & Acquisitions projects; or a poorly thought-through implementation of measures. To compound matters, processes concerning Mergers & Acquisitions are very individualistic and how they play themselves out can differ vastly. However, the company’s executive direction can respond to the high demands of a difficult baseline situation like this and give HR Management a much-needed professional boost. Eliciting the expertise and competence of an experienced HR Manager is the ideal answer. 

Mergers & Acquisitions: HR Management’s role in share deals

In a share deal, shares in the company are only transferred internally. Externally the company continues to exist as is. With that being the case, this initially has very little bearing on the Head of Human Resources.  For the most part, the involvement of the employee representatives is limited to information from the Economic Committee, which they frequently only become privy to with the “signing”. In the case of a conglomerate, what can happen is that a group Works Council or the European Works Council (EWC) has participation rights. However this depends on the individual case. 

Mergers & Acquisitions: HR Management’s role in an asset deal

In an asset deal, business assets and commodities belonging to the company are sold and are transferred to the buyer by way of singular succession. With the transfer of individual assets, it is additionally possible to execute a transfer of an undertaking pursuant to Section § 613a of the German Civil Code (BGB). In a case like this, the existing employment relations are likewise transferred to the buyer. 

HR Management faces many challenges in an asset deal in the course of a Mergers & Acquisitions situation. If the preconditions for a transfer of an undertaking pursuant to Section § 613a of the German Civil Code (BGB) exist, then the employees must be informed about the transfer of the undertaking. In the case of transfers of undertakings under Section § 613a, the law also provides for a change freeze, according to which works agreements and collective agreements cannot be changed by the acquirer within one year. If an HR strategy for subsequent integration already exists, then the seller can terminate the collective agreements prior to the transaction. In the case of an asset deal, the employer may still be obliged to negotiate a reconciliation of interests and a social plan if the transaction results in a change in operation under Section § 111 Sentence 3 BetrVG. The Economic Committee must also be informed about the transaction. In the case of corporate groups, the group Works Council or the European Works Council may still have participation rights. 

» For more than ten years now I’ve been supporting my clients in M&A activities of varying sizes. Most of the time, I take on these tasks in addition to the role of a Human Resources Manager. «

Lars Schott, HR Manager

HR-Interimmanager Berlin

In brief what HR Management involves in Mergers & Acquisitions:

  • Practical installation of data rooms; coordination with law firms 

  • Answering questions from bidders; overseeing of the Q&A session

  • Due diligence support; professional cooperation with auditors

  • Support for Works Councils and trade unions during the transaction

  • Securing a top-notch reputation with employee representatives

  • Skilled Stakeholder Management; overseeing the deal team

  • Compilation of Transitional Service Agreements (TSA)

  • The supervision and settlement of employee share schemes

  • Compilation of an executive summary on the company pension scheme 

  • Transfer of pension obligations (pension valuation, CTA structure)

  • Reorganisation or restructuring of pension obligations

  • Communicating change – taking people along with you on the change journey 

  • Workshops with Works Councils and employees on the change process

Occupational pension provision as a deal-breaker 

In Mergers & Acquisitions, pension obligations are often transferred along with the company. These can significantly reduce the purchase price and pose a difficult topic for the seller. For the buyer, the transfer of pension obligations is not a very exciting prospect, but at best, an instrument to reduce the purchase price. This is why the transfer of pensions between the parties tends to be negotiated right at the end and can also become a deal-breaker for Mergers & Acquisitions. Generally in order to be able to handle pension claims reliably, a fair bit of historical knowledge about the company’s pension scheme is necessary. This is knowledge that exists with the seller and is lost with the sale of the company. In the past, I have worked with experts in occupational pension provision to prepare an executive summary for the buyer. This ensured that the buyer would later have: clarity about the pension schemes and supplementary protocols, the employee groups concerned, the company practice and history, as well as an understanding of the CTA structure and the means of protection. Something that can also be advantageous for the seller is the restructuring of pension commitments or outsourcing them to an insurance company before the sale. 

Further information:

» My services: HR Management

» My services: Labor Relations

» My services: HR Restructuring & Change Management

» Project example: Head of HR with focus on Mergers & Acquisitions

» Project example: HR Consultant for business transitions

» Project example: HR Change Manager - monitoring the merger of companies

» Project example: HR Consultant for Business Tranfers

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