Preparing for mergers and acquisitions is a lengthy process. Business leaders need to perform their due diligence regarding the resources and obligations of the other company. They need to take steps to prepare to combine company operations and cultures. They even need to consider the possibility of regulatory officials intervening due to antitrust concerns.
Business transactions can fail without proper planning. Even when a merger or acquisition is successful, it can lead to significant complications and financial setbacks for an organization. In some cases, employees affected by mergers and acquisitions may take legal action against their former employers.
Why do mergers and acquisitions sometimes trigger litigation?
Combining two organizations inevitably generates a degree of redundancy. Companies that acquire another business or merge with an outside organization often undergo a lengthy review process to determine the best way to modify staffing.
Layoffs and terminations are common after mergers and acquisitions. The workers who lose their jobs may raise claims of wrongful termination in some cases.
Particularly in scenarios where there appear to be trends regarding which workers lost their jobs or what workers kept them, employees might allege that the company discriminated. If workers who share certain protected characteristics, such as their religion, race, sex or disability status, were disproportionately represented in the layoff, that could bolster claims that the company wrongfully considered protected characteristics while downsizing.
Organizations need to take care to ensure that layoffs do not have a basis in protected characteristics but rather on seniority, job performance or other employment-related factors. Working with legal professionals during large business transactions, including mergers and acquisitions, can reduce the likelihood of litigation and other complications in such scenarios.