In cross-border M&A transactions, parties tend to focus primarily on financial, tax, and corporate matters. Yet the success of integration often hinges on global mobility issues. The employment status of mobile staff, immigration obligations, tax settlements, and the harmonisation of employment terms and conditions can affect not only the smoothness of the transaction process but also its ultimate value.
Acquiring a company does not mean free rein over its employees
One of the most frequently overlooked areas is the analysis of local employment law obligations. In EU member states, the transfer of an undertaking, or part of one, is governed by rules implementing Directive 2001/23/EC, while the UK continues to apply the Transfer of Undertakings (Protection of Employment) – or TUPE – regulations. This means a change of ownership does not automatically give the buyer a free hand in shaping its workforce. Failing to meet information or consultation obligations can lead to employment disputes, added costs, and delays in integration.
Due diligence should not be limited to HR documentation
Global mobility due diligence should extend beyond reviewing employment contracts. A change of employer or group structure may require updating work and residence permits in certain jurisdictions. It is equally important to verify tax and social insurance obligations, including documents confirming which social security system applies. In practice, assessing the risk of a foreign permanent establishment arising is increasingly important, given that employees may carry out work outside their employer’s home country.
Losing key employees is another transactional risk
Post-acquisition integration is also when decisions on pay and benefits are made. Employees on international assignments often benefit from individually negotiated relocation packages, housing allowances, educational support, or private medical care. Harmonising benefits too quickly can increase the risk of losing people whose knowledge and experience are key to the venture’s overall success.
Global mobility ought to be part of the deal strategy
From the buyer’s perspective, global mobility should not be reduced to an administrative task ticked off during post-merger integration. Bringing employment law, immigration, and tax specialists into the due diligence process makes it possible to identify risks at an earlier stage, accurately estimate potential liabilities, and plan employee integration.
In a growing number of transactions, effective management of employee mobility determines whether the expected synergies are achieved, and the investment’s long-term value is realised.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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