You have just been told that your Company will be acquiring another Company. Although your first question could be “How will this impact me?”, your first question should be, “Is this an asset sale or a stock sale?” There are many implications for Human Resources in any type of an acquisition, but some will depend on which type of acquisition it will be. You and your team are likely to catch the first wave of questions and work that will follow.
Stock Sale
Let’s talk first about the definition of a stock sale versus an asset sale. A stock sale is when your Company is acquiring all assets and liabilities of another company. In a Stock Purchase, all of the outstanding shares of stock of the business are transferred from the seller to the buyer. The buyer in effect steps into the shoes of the seller, and the operation of the business continues in an uninterrupted manner. Unless specifically agreed to, the seller has no continuing interest in, or obligation with respect to, the assets, liabilities or operations of the business.
Asset Sale
On the other hand, in an Asset Sale, the seller retains ownership of the shares of stock of the business. The buyer must either create a new entity or use another existing entity for the transaction. Only assets and liabilities which are specifically identified in the purchase agreement are transferred to the buyer. All of the other assets and liabilities remain with the existing business and thereby the seller.
Organizational Structure
In both cases you need to begin to build out your organizational structure of the combined entities as soon as possible. This will act as your guidelines for interviewing and assessing employees for future roles. The employees who will be, as well as your existing employees, will be anxious to know about any changes in the organization, their positions, location of their work and/or the reporting structure. You also need to have your people, particularly the top-level of the new organization, in place quickly. Frequent and early communication from leadership will reduce anxiety on both sides.
Policies and Procedures
In both situations you will need to figure out what the company being acquired has in place for their policies and procedures and how they align with those that you have in place. Frequently there can be a meeting of the minds where you can take the best of both worlds and adopt new P&P’s. Not only does this give you an advantage but is a nice show of collaboration to the employees being acquired. Especially, understanding the differences in both leave policies and having a transition plan before the close date is critical to reducing employee disruption and managing expectations.
Benefits
In most cases, when it is an asset sale, you will be able to choose which liabilities to exclude from the sale, such as the 401(k) plan provided by the seller. In a stock sale, you will be required to assume all the benefit plans, at least for a period of time, and may not exclude any up front.
Other benefit considerations, which we will explore in more detail next time, include how to handle FSA’s, LOA’s, 401(k) account balances and outstanding loans, bonuses and medical deductibles and out of pocket maximums.
Acquisitions bring a lot of uncertainty but also a lot of excitement around the possibility of building a bigger and better entity…….. almost overnight!