HR, finance, and legal teams face immense challenges during mergers and acquisitions (M&A), from compliantly onboarding new talent and matching contractual terms to navigating foreign labor laws and offering HR support in new locales.
Disruptions to daily workflows and cultural shifts can leave employees feeling disheartened and confused. Payroll delays, benefits changes, and disorganization cause fear and frustration and can lead to resignations.
By putting your team in focus and using the right resources, you can facilitate a smooth transition that keeps your workforce intact and your business flourishing. This guide details common employee concerns during mergers and acquisitions and offers useful tips to keep talent engaged as you expand.
7 employee concerns during a merger or acquisition
The seven most common employee concerns during mergers and acquisitions involve job security, communication, cultural integration, compensation, regulatory compliance, HR support, and morale.
We discuss each of these in detail below.
Job security
One way mergers and acquisitions impact employees is through layoffs. During the transition, business leaders often restructure the target company, rendering many positions irrelevant and significantly reducing staff.
This inevitable process often occurs regardless of an employee’s experience or qualifications. As a result, many employees undergoing mergers or acquisitions worry about job security.
Communication and transparency
Employees often express concern about poor communication and transparency during the M&A process. They want to know exactly what type of merger or acquisition is taking place, how it’s unfolding, and how it will affect them.
Without this information, employees feel anxious about the merger or acquisition’s potential impact on company culture and their roles within the organization.
Cultural integration
During a merger or acquisition, two company cultures merge into one. Establishing a unified culture and value system is challenging and can disrupt existing workflows and standard procedures in both companies. Managers may change existing processes in the target company or discard some altogether.
After years of working with familiar systems, employees may worry their workplace dynamics will change and feel uncertain about how they’ll fit into the new organizational culture.
Compensation and benefits
Under new leadership, employees often worry about changes to compensation, benefits, and other employment terms. Will the new employer continue offering retirement benefits? Will salaries remain the same? What about performance-based rewards?
Imagine one company’s individual performance-based rewards system meets another’s group-based approach. Without the right strategy in place, this is a recipe for discord.
Concerns regarding compensation and benefits are a major issue for employees. Their income and perks directly impact their lives inside and outside of work, from their financial security to their mental and physical well-being.
Unfamiliarity with local labor laws
When a company merges with an overseas organization, employees in the foreign market may worry the new leadership does not understand local labor laws in their region.
Overlooking local employment regulations can lead to serious complications, such as noncompliance penalties and transaction invalidation. These issues can directly impact employees—for instance, payments may arrive late, a feeling of restlessness may emerge across teams, and employees can lose confidence in their employer.
If collective bargaining agreements (CBAs) regulate the target company’s industry, the parent company will face additional complications and need to include labor unions in decision-making processes.
When an organization expands its market share through a merger or acquisition, it must train its HR team in international employment law. Or, it can partner with a third-party legal entity with local expertise to ensure global compliance on its behalf and facilitate a smooth transition for its workforce.
Lack of local HR support
When acquiring or merging with an overseas operation, employers struggle to offer continuous, robust HR support for talent in foreign locales. Some challenges they face include time zone differences, customs variances, and language barriers.
Employees who suddenly lose access to reliable, consistent HR support may face a growing list of unresolved issues impacting their daily work. They may fear their situation will only worsen.
Morale and engagement
All of the above concerns lead to deteriorating morale and engagement. Without clear communication and assurances regarding job security, cultural integration, compensation, and benefits, employees will experience increasing fear and uncertainty.
They may worry about the future of the organization and their overall sense of belonging and commitment to the company, which can lead to resignations.
How to combat employee concerns during a merger or acquisition
Global companies can implement several strategies to mitigate these concerns and maintain employee retention and engagement during mergers and acquisitions.
For instance, acknowledging employees’ worries, communicating, providing support resources, and offering training and development programs can drastically reduce stress and ensure employees feel secure and stable throughout the transition.
Below, we outline five key strategies for keeping your employees at ease and reducing churn as you undergo a merger or acquisition.
Communicate clearly and early
Clarity helps reduce ambiguity and uncertainty. Guide employees on how their responsibilities may change as the company undergoes its transfer, and clarify what you expect of them during and after the transition period.
Provide open, honest, and frequent communication about the M&A process. Inform employees about why the merger or acquisition occurred, the timeline, and how it will affect them personally and professionally.
Consider communicating the following points to your team to mitigate their concerns:
- Confirm the type of merger or acquisition that’s taking place
- Explain why the merger or acquisition is occurring
- Detail how it will unfold
- Outline what challenges your team may face
- Clarify where each employee stands and what changes they can expect
Communicate any changes in roles, responsibilities, reporting structures, and performance expectations resulting from the transition. Remember to address employees’ concerns and questions promptly to alleviate uncertainty.
Acknowledge employee concerns
Acknowledging employee concerns demonstrates empathy and builds trust, especially when you follow it up with action.
Recognize that employees may experience anxiety and uncertainty during a merger or acquisition. Validate their concerns, empathize with their feelings, and create channels to express their thoughts and emotions in a safe environment.
For instance, conducting regular surveys before, during, and after the transition gives you a clear understanding of your employees’ concerns and allows you to address them as they arise.
Provide support resources
While salary, benefits, and payroll disruptions directly impact employees’ physical lives, your team’s psychological well-being is equally important. Remember to offer support resources they can use during this seismic event in their lives.
If neglected, unresolved issues and emotional stress can evolve into larger problems later. Consider offering counseling services, employee assistance programs (EAPs), or access to HR professionals trained in managing change and transition.
These programs are useful resources for employees facing stress, anxiety, and other challenges during the transition, and they help you more effectively resolve issues across large teams.
Invest in training and development
Training and development programs are also important during major disruptions like a merger or acquisition. As workplace dynamics and organizational structures change, employees can take agency over their situation by developing new skills and strengthening their position within the company.
Such programs help talent adapt to changes and thrive in the post-merger environment. Investing in employee development also demonstrates a commitment to your team’s growth and career advancement, which can boost morale and motivation.
Reassess your workforce model
Keeping up with the explosive growth of a merger or acquisition often requires an entirely new workforce model. Traditional models struggle to support global teams, navigate foreign employment laws, run compliant global payroll, and offer HR assistance in new locales.
By partnering with an employer of record (EOR), you can adopt an agile HR framework that eliminates the complexities and risks of M&A transactions and maximizes opportunities.
An EOR is a third-party entity with global infrastructure and legal expertise that can handle all the challenges of inorganic growth on your behalf. The benefits of partnering with an EOR include the following:
- Regulatory compliance. With a network of international legal specialists, an EOR partner can ensure compliance with foreign labor and tax laws as you expand globally.
- Cultural expertise. With tenured global expertise, an EOR helps you navigate foreign customs and norms, ensuring you can develop harmonious relationships with key market players in your new country.
- Compliant global payroll. Partnership with an EOR gives HR and finance teams access to integrated workforce management solutions that guarantee timely and accurate global payroll for a distributed workforce.
- Contractual term matching. An EOR partner also gives you access to expert local resources, such as preestablished, robust employment contracts to match contractual employment terms in any jurisdiction.
- Low-cost, competitive benefits. Through their own economies of scale, an EOR partner can offer low-cost, competitive benefits packages to companies of all sizes.
- Streamlined onboarding. An EOR handles compliant onboarding for acquired employees. This includes registering new talent for payroll, setting them up with global benefits, and completing all other necessary paperwork on your behalf.
- Ongoing HR support. With global reach, an EOR can offer ongoing HR support to your team in their native language, no matter their location.
- Low-cost alternative to transitional service agreements (TSAs). By handling every aspect of global workforce management for the merger or acquisition, from ensuring compliance to offering ongoing HR support, an EOR partner is a cost-effective alternative to a TSA.
- Flexibility. An EOR provider offers a flexible and scalable solution that can adapt to your company’s evolving needs during the transition, such as changes in headcount or geographic location.
Overall, an EOR partner reduces costs, ensures compliance, and provides expert guidance and support throughout a merger or acquisition, making the transition easier and less stressful.
Learn more: What Is an Employer of Record (EOR)?
M&A impact on employees: FAQ
Below, you can find answers to common questions about how M&A transactions impact employees.
How are employees affected by a merger or acquisition?
Mergers and acquisitions can positively or negatively affect employees. For instance, the uncertainty of a company transfer can erode employee morale, impact productivity, and lead to resignations. Employees in redundant areas of the new company also face layoffs. Conversely, M&A can open doors to new positions the original employer didn’t offer.
How do you manage employees during a merger or acquisition?
Business leaders can use the following strategies to manage employee relations during a merger or acquisition:
- Communicate clearly and early
- Acknowledge and validate employee concerns
- Provide support resources
- Invest in training and development
- Adopt a flexible HR infrastructure
How do you engage employees during a merger or acquisition?
Business leaders can use the following strategies to engage employees during a merger or acquisition:
- Communicate with employees about the transition and how it will impact them
- Monitor employee concerns and resolve issues as they arise
- Provide support resources
- Offer training and development opportunities to empower employees
- Involve employees in important decisions
Consider offering counseling services, employee assistance programs (EAPs), or access to HR professionals trained in managing change and transition.
Support your new global workforce with Velocity Global
Whether you are in the planning phase or ready for a merger or acquisition, partnering with a vetted EOR like Velocity Global can make a world of difference.
Our team of tenured experts can guide you through strategic market assessments, regulatory considerations, and cultural nuances so you can manage complex acquired growth without the added headache.
We offer an agile and flexible HR infrastructure that eliminates the need for TSAs, reduces costs, and ensures your M&A process goes through compliantly without disrupting employees’ day-to-day workflows. Plus, we can stay on as a long-term partner as you stabilize operations post-transaction.
Contact us today to learn how we can help you streamline corporate transactions and keep talent engaged along the way.
