Mergers, acquisitions and transfer of undertaking

Labor law considerations in business transfers

In a merger or acquisition, not only financial and legal aspects play a role, but labor law consequences are also of great importance. Personnel, employment contracts, and internal regulations are critically examined during the due diligence investigation. A careful approach prevents surprises afterwards.

Personnel in the due diligence investigation

During an acquisition or merger process, the due diligence investigation assesses what labor law risks and obligations exist. Consider:

• Employment contracts of key employees or statutory directors;
• Non-compete or non-solicitation clauses;
• Bonus or stock option plans;
• Job security or ongoing legal proceedings.

The results may lead to additional agreements, new employment contracts, or guarantees in the transaction documentation. We advise prospective buyers and sellers on these processes and work closely with our colleagues from Corporate / M&A.

Business transfer: automatic transfer of personnel

When, as a result of a merger, division, or acquisition, a business or part of it is transferred and retains its identity, this is considered a business transfer. This has important consequences:

• Employees automatically transfer to the acquiring party;
• All rights and obligations from the employment contract remain intact;
• Seniority is preserved and cannot be affected;
• Divergent employment conditions cannot be imposed unilaterally.

The assessment of whether there is a business transfer is legally complex and depends on the actual circumstances. An incorrect assessment can lead to invalid contract changes or claims from employees.

Practical legal advice for a smooth transition

We support you with:

• Assessment of labor law risks in merger and acquisition processes;
• Negotiation and drafting of contracts and guarantees;
• Evaluation of business transfers and advice on personnel consequences;
• Harmonization of employment terms after transfer.

Are you considering a merger, acquisition, or transfer of business activities? Please contact us.