By Justin Hill, Senior Manager, Client Solutions, GoGlobal
Despite recent fluctuations, M&A activity is poised for a rebound through 2025 driven by pent-up demand and the need for strategic growth. According to PwC’s 2024 Mid-Year Outlook, companies are increasingly turning to M&A to navigate emerging trends like AI and to accelerate growth amid economic uncertainty. Cross-border M&A, in particular, is becoming a key strategy for global expansion and business reinvention.
When planning a cross-border merger and acquisition (M&A) or carveout transaction, numerous critical steps must be taken to facilitate a successful and smooth transition. Among the most significant challenges in any M&A deal is time management. Early planning and consideration of post-transaction requirements often determine the overall success of the deal.
Another crucial factor is whether the M&A or carveout end client has existing operations in the target country. This is where a well-structured Employer of Record (EOR) can provide invaluable assistance and offer flexible, tailored solutions that promote continuity.
HR due diligence
One of the foremost tasks in planning an M&A or carveout transaction is conducting thorough HR due diligence. This means identifying which employees will need to transition and whether the acquiring company has operations in the relevant countries. It is also essential to explore how to align the workforce – either within the existing corporate structure or through an EOR partner.
The first step is to assess identified workers’ current employment terms, focusing on seniority, benefits and salary. Understanding these factors is critical, particularly in evaluating potential severance obligations if employees choose not to transition as part of the M&A deal.
Employees may be offered new employment but are not necessarily obligated to accept the transfer. Long-serving employees, or those nearing retirement, might opt for redundancy rather than continue under new management.
Early communication with employees is vital to set expectations, establish timelines and explain what the M&A deal means for them. Engaging a reliable EOR early in the process can significantly aid in this communication and planning.
An EOR like GoGlobal, with local teams on the ground, can assist in conveying messages in the local language. They can address any concerns employees may have and clarify how their new employment will be structured under the EOR model.
Workforce restructuring
Workforce restructuring is a complex and critical component of any cross-border M&A or carveout transaction. This process involves aligning the workforce to fit the new organizational structure while ensuring that employees are treated fairly and equitably throughout the transition.
In many cases, restructuring may involve reassessing the roles and responsibilities of employees to better align with the strategic goals of the new entity. This can mean redefining job roles or adjusting reporting lines. The challenge lies in executing these changes while minimizing disruption to the business and maintaining morale among the workforce.
An effective EOR can play a pivotal role in workforce restructuring. An EOR leverages expertise in local labor laws and regulations to confirm restructuring activities comply with legal requirements. This expertise helps companies meet jurisdiction-specific legal standards during workforce restructuring. Such expertise is particularly important in cross-border transactions as employment regulations can vary significantly from one country to another.
The EOR hiring model helps companies manage the complexities of employee transitions, including communications and severance packages when needed. Throughout it all, the EOR partner ensures all documentation is completed accurately and on time. This support streamlines the restructuring process, allowing the acquiring company to concentrate on its strategic goals.
Aligning compensation and benefits
Aligning compensation and employee benefits during an M&A or carveout is one of the most challenging aspects of the transition process. While matching salaries and allowances may be straightforward, complexities arise when dealing with non-standard benefits. This may include private healthcare plans, retirement benefits or death-in-service plans that may differ significantly between the existing employer and the new entity or EOR.
The goal is to offer employees an overall compensation package that is comparable or superior to their current package. This may involve adjusting specific benefits to match current offerings or providing additional allowances to compensate for any differences.
A competent EOR, with established operations in the relevant countries, will have a comprehensive portfolio of benefits and options. Such robust offerings can help bridge any gaps in compensation and benefits.
Union and labor relations
Union and labor relations add another layer of complexity to cross-border M&A and carveout transactions.
In some jurisdictions, the acquiring company may encounter different unions than those associated with the existing employer. This can complicate negotiations and require extra resources to develop terms satisfactory to all parties involved in the transition.
In addition to unions, different collective bargaining agreements (CBAs) may apply, adding further complexities. CBAs often provide additional benefits beyond the standard employment agreement. Syncing these benefits with those offered by the new entity or EOR is important.
GoGlobal, for example, conducts thorough reviews of the current benefits employees receive under their union or CBA. Local experts work diligently to provide employees with equal or more comprehensive benefits during the transition process.
Cultural integration and change management
Another critical aspect of cross-border M&A transactions is managing cultural integration and change.
Differences in corporate culture can pose significant challenges, particularly in international deals where cultural norms and business practices may vary widely. Effective change management strategies are essential for making employees of different backgrounds feel valued and integrated into the new organization.
An EOR can be instrumental in leading cultural integration, providing guidance on best practices and local customs. They can also assist in developing communication strategies that resonate with employees from diverse cultural backgrounds. This helps to build a unified company culture that supports the goals of the new entity.
Making M&As and carveouts a success
Successfully navigating the complexities of cross-border M&As is not just about compliance – it’s about securing the future of a business. Proactive planning, thoughtful communication and the right partnerships can turn employment challenges into opportunities for growth.
By partnering with an experienced EOR like GoGlobal, companies can confidently navigate the intricacies of international workforce transitions. Beyond managing logistics, a skilled EOR fosters continuity, stability and employee confidence – making the human element of M&A as successful as the financial strategy.
In a rapidly changing global landscape, this people-first approach is key to sustainable business growth and long-term success.
Contact us to learn more about how our dedicated M&A Solutions team can help support your business growth strategy.