No One Left Behind: Solving for the Talent Continuity Gap in Divestitures

By Liliana Mata, Executive Director, Account Management, GoGlobal

Everyone agrees that people matter in mergers and acquisitions (M&As), so why do we plan deals like they don’t?

According to research by Transaction Advisors Institute in association with Mercer, nearly all (91%) of corporate acquirers say human capital is a critical driver of value creation, but less than half (41%) actually factor it into the deal thesis. That disconnect can be costly — especially in carve-outs.

A carve-out happens when a business unit is separated from its parent company during a divestiture. With that separation comes complexity. It’s not simply a matter of spinning off assets or systems. You’re detaching teams and rebuilding an incomplete business.

Workforce continuity is critical to keeping deals on track, customers engaged and IP intact. Break the talent transition and you break the value chain.

HR due diligence: identifying risks before you inherit them

HR due diligence isn’t a checklist item. It’s a critical component of financial and operational due diligence. Without a clear view of people risks, acquirers can walk straight into hidden liabilities, compliance exposure or talent gaps that derail business continuity.

Mercer recommends assessing seven key HR elements to ensure a successful carve-out:

• Leadership & Culture: Do we have the right leadership and culture to run the carve-out business as a company?
• Deal Perimeter & Workforce Scope: Who’s in scope and who isn’t?
• HR Infrastructure: Which HR systems, policies, and processes will we inherit, lose or choose to abandon?
• Compensation & Benefits: What is the total reward structure? How will it need to evolve post-deal?
• Talent Transfer: How should we transfer people between legal entities and under what model?
• Transition Support: What do the deal terms say about transition timelines, employee support and Transition Service Agreements (TSA)?
• Compliance & Regulatory Risk: Are there immigration, labor law or compliance exposures we need to resolve?  

One common and commonly underestimated risk area is orphaned employees.

Orphaned employees are workers included in the carve-out transaction but left without a legal employer after the divestiture. It typically happens when the carve-out business or acquiring company does not have an in-country entity to absorb them from the parent company.

We see this happening most frequently in markets where the business has a small local headcount. When orphaned employees represent a minority, they’re easy to overlook in the broader deal structure.

But this is a classic case of the devil being in the details.

When orphaned employees are left in limbo, you’re not just dealing with paperwork delays. You’re risking non-compliance with local labor laws, breakdowns in workflows and potential disengagement and attrition of key talent.

Orphaned employees can stop a deal in its tracks. Here’s how to solve it before it becomes a problem.

Talent transition models: solving for workforce continuity

When it comes to orphaned employees and overall workforce continuity in divestitures, there’s no one-size-fits-all solution. Every deal is different. Every market has its complexities. Every headcount decision carries operational, legal and financial weight.

At GoGlobal, we help clients solve these variables with a tailored solution. Drawing from our portfolio of global business solutions and tapping on the expertise of our in-country teams, we assess each situation based on the right balance of speed, compliance, cost and long-term flexibility.

Below are the three primary solutions we offer, each with its own strengths and trade-offs:

Partner evaluation: asking the right questions

When it comes to ensuring talent continuity in a carve-out, internal HR teams struggle to go at it alone, especially across multiple markets, employment models and legal systems. You need a partner who can navigate the complexity with you and on your behalf.

Here are five essential questions to ask when looking for the right partner:

• Do you support multiple employment models and transitions between them?
  Your needs may change over time. It’s forward-looking to work with a partner who can seamlessly help you move from EOR to legal entity over time, for example.
• What’s your experience with carve-outs and TSA-driven timelines?
  Assess if they have supported transactions with complex deal perimeters, TSA and orphaned employees.
• Can you operationalize the transition within the deal timeline, across multiple markets and employment models?
  Find out if your partner has the infrastructure, capabilities and capacity to deliver on their claims.
• What type of in-country support will our employees receive?
  It’s important to consider your post-deal needs upfront. Will onboarding, employee communication and ongoing HR support be available in local languages and time zones, for example?
• How do you manage compliance across labor laws, tax regulations and permanent establishment risks?
  Establish that your partner has in-depth local expertise to provide proactive guidance.

Finishing strong: transforming risk into readiness

Carve-outs are complex but keeping your talent in place doesn’t have to be.

With the right partner, you can move fast without cutting corners, maintain compliance across borders and give employees a transition experience that builds confidence, not confusion.

At GoGlobal, we help companies de-risk carve-outs by ensuring workforce continuity with flexible models, local expertise and deal-tested implementation.

Contact us if you’re navigating a divestiture or planning a carve-out. We’ll be delighted to help.