A merger is often carried out because the owners of both companies believe it will be beneficial moving forward. The companies are merging to give themselves a wider range of capabilities and to accomplish things that couldn’t be done independently. An acquisition can be similar, although it may also happen when one owner simply wants to retire or sell their company to another party.
Either way, the resulting business may need to reorganize its employees after the merger or acquisition. The trouble is that there can sometimes be an overlap. Certain employees will become redundant, so steps have to be taken to address this in the new company structure.
Why does a merger create redundancy?
The big issue is that employees may be performing similar jobs at both companies.
For example, imagine that two small businesses are merging. Each has an HR department consisting of four people. Once the companies have merged, there’s no need to have eight people in that division. Four may still be able to handle the workload, or the company may only need five or six. A handful of employees are now redundant.
This doesn’t necessarily mean they have to be fired, although layoffs are common after mergers and acquisitions. It may be possible to shift them to other departments or give them new tasks as the company grows and changes. But the employee structure is certainly something that business owners should consider as they go through the process of organizing a merger.
This can also be a complicated process from a legal perspective. It’s crucial for all involved to understand exactly what options they have and what legal steps they need to take at this time.