Post-Purchase Integration: The Legal Requirements

05 Apr 2024

Once your business acquisition is complete, it’s time to start thinking about the post-merger integration.

What is the post M&A integration process? Well in simple terms, it’s ironing out the practical and legal details involved in bringing two businesses together.

As part of the completion and post-completion matters, your solicitors will wrap up the necessary filings at Companies House and arrange payment of the stamp duty on shares.

Post-Deal Integration Stage Decisions

Practically, you’ll need to decide what to do about:

• IT systems and equipment

• Issuing notices to customers and suppliers

• How to communicate the merger publicly

• Creating the culture of the new work environment

But you won’t dive in from a standing start. During the process of the transaction, you will devise a strategy to deal with these things. Importantly, the due diligence report will usually highlight issues that require ‘post-acquisition action’ and this can act as your post-integration checklist.

There are more than just practical considerations to deal with though. In legal terms, there are a few key actions that you will likely need to take after the completion of the transaction.

Employment and HR

Perhaps the biggest task is sorting out how to deal with your employees. How do you integrate employees after acquisition? Do you need to update their contracts?

In a share purchase deal, the identity of the employer remains the same before and after the sale, so the employment contracts do not necessarily need to change.

In a business purchase, the employees may get transferred due to the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). In this case, it is simply a change of name on the contract that is required.

Regardless of how you structure the deal, you may want to review the employment contracts you have in place. It’s a good time to replace individual and collective employment terms, if they don’t align with your strategy and vision for the business going forward.

Unfortunately in some circumstances, it may be necessary to make redundancies after the acquisition. Of course, there is a rigid process to follow in order to handle redundancies compliantly, particularly after an acquisition, so it’s important to seek specialist support from an employment solicitor.

Finally, one of the ways that you can influence the new culture of the organisation is to harmonise the HR policies and procedures for the business. This will include agreeing benefits packages and things like the dress code, and working from home.

Supplier Contracts, Leases and Other Key Contracts

If you have become a new entity as a result of the merger, then you’ll need to assign or novate the contracts you have with external parties.

But even if the business name has remained the same, you may consider renegotiating certain terms of your contracts. Perhaps you’re now in a stronger position to renegotiate your supplier contracts. Or you now require more office equipment from your stationery supplier.

Your due diligence report will highlight clauses in your contracts that are potentially onerous, or put you in a weak position. The months of post-merger integration might be a good time to renegotiate any of these problematic clauses or contracts.

Intellectual Property

You need to manage the copyright, trademarks, and patents (if any) of the new business. This could include merging trademark portfolios, or analysing if there are any gaps in your IP protection.

Litigation

Your due diligence report (and your discussions with the other party) will inform you of any ongoing litigation that the business is involved in. It’s important for the new decision-makers and any new in-house lawyers to get up to speed on ongoing cases as soon as possible. You don’t want to miss any deadlines, and you might be able to negotiate a settlement more easily (and save the business money) now that new people are involved.

Managing Business Post-Purchase Integration Legally

Working through your post-acquisition checklist can take time. Use your due diligence report as a reference point and think strategically about which issues you need to tackle first. Top of the list should be your employees, but after that, the priorities will vary between businesses.