A merger and acquisition can benefit two companies that want to form a new entity or one that wants to purchase the other. They can also affect employees who work for the companies, leading to employment law disputes.
Mergers and acquisitions
With a merger, two companies form a new entity which is often given a new name and the former companies are dissolved. A merger may be used to take advantage of the resources of the two companies to become more competitive in the marketplace.
With an acquisition, one company buys the other company. Sometimes, the company that is purchased becomes part of the company buying them. An acquisition may be used to reduce costs, expand product types or to use technology more efficiently.
Effect on employees
A merger and acquisition can have a significant effect on employees, and it may lead to employment law disputes.
It can leave employees uncertain about their future within the new company and have an impact on their morale. Some employees may choose to terminate their employment before the company eliminates their role, leaving the company with a loss of knowledge and additional recruiting costs. If there is a change in leadership, organizational culture or challenges with communication, employees may be less engaged in their work.
Employment law disputes can arise regarding benefits and compensation, talent management and succession plans, and labor law issues. Specifically, the new company can face lawsuits about wage and hour violations and contract disputes.
Unless the merger or acquisition is managed carefully, it can also cause reputational harm for the business and difficulty attracting new employees.
