The HR lawyer’s role in a successful global merger
In an increasingly integrated global economy, businesses and their employees progressively find themselves obliged to think and act in accordance with their company’s business strategy, which frequently transcends national borders. Businesses need to appreciate the complexity of the legal process in cross-border mergers and, in particular, the disparities and dissimilarities in local HR law, from jurisdiction to jurisdiction. Based on a case study, we describe how the collaboration between a united group of lawyers and human resources (HR) departments across numerous jurisdictions can help companies successfully overcome the HR challenges of mergers and the subsequent integration of the businesses.
For any company with overseas operations, each region in which it conducts business represents a separate set of local regulations and restrictions to be considered and respected. These considerations must often be factored into both their methods of operation and strategic planning. As constituent HR departments serve and protect the interests of both employees and the businesses that employ them, it has become increasingly important for HR to be aware of the cross-border vision and to have easy access to legal and regulatory expertise that can be relied upon when required.
The case at hand
Last year, a major multinational fashion company based in Italy found itself in need of continuous day-to-day legal help for a major multi-jurisdictional project that would clearly affect the firm’s internal and external policies. The company had been strengthening its international position since 2004 through expansion into overseas markets. This expansion was rapid and, initially, trouble-free. However, difficulties arose with respect to intra-jurisdictional coordination; the company soon found itself requiring legal direction and help in each foreign office. The pace of growth and acquisition was so swift that the company found itself unaware of the scope of help that was needed and the type of consultant or lawyer that would suit its requirements. The process of identifying and approaching individual firms in numerous jurisdictions can be tricky, especially when there are so many facets to consider.
Need for an integrated approach
The company was aware of the need for an integrated approach. While a number of European law firms offer overseas operations, fewer possess networks extensive or comprehensive enough to offer support and localized proficiency in every market the company had penetrated in Asia, the Middle East, Africa, Latin America and Australia. Following the worldwide merger, which would see the company integrated with a major French manufacturer, the number of countries in which the business would operate would significantly increase. Selecting the legal advice that could contribute to the growth of the business was significant.
The company chose the Ius Laboris HR law firm alliance to help with the merger. The alliance was, at that time, present in 125 cities across 44 separate jurisdictions. Companies have access to 1,300 specialized labor and employment lawyers whose clients include Fortune 500 companies covering sectors from finance to manufacturing and pharmaceuticals to technology.
The company was provided with HR lawyers located where the firm had its operations. And, as every jurisdiction has its own rules and characteristics, the alliance was able to provide local legal expertise committed to solving HR issues on a global scale. The employment and labor law issues facing businesses may be global, but their solutions frequently need to be adapted to local market conditions. This was paramount during this merger, between the Italian group based in Milan and the smaller French group based in Paris. Both had distribution mainly in Europe and also in wider global markets. The merger was preceded by a time-constrained due-diligence exercise. From an HR viewpoint, the main goal was to integrate the two different groups into the Italian structure and organization in less than six months. Before the merger, the HR directors of the two businesses reached out to the Ius Laboris member firms located in their respective jurisdictions.
Two centers of direction
At the beginning, only two law firms were involved. After a primary analysis of the different company requirements, Ius Laboris decided, together with the international HR director and his team, to activate two centers of direction. One was based in Paris and would deal mainly with the substantial and complicated issues regulated by the French law, in addition to the social plan for after the merger. The second center would be in Milan and would co-ordinate all other activities in the operations and branches in Italy, Spain, Portugal, Germany, Ireland, the UK, Switzerland, Japan and other markets outside Europe. The centralized help from Italy coordinated the entire due-diligence process, including the data room and all documentation, and reported on the operation by using a practical and single sample, which was easy to read for all of the countries involved. All documents were collected from one point of reference in Italy. The Ius Laboris team and project manager in Italy first analyzed the company’s structure, the number of employees, its turnover and the overall employee costs. Based on this information, how to contact colleagues from the Ius Laboris alliance in other jurisdictions was decided to have more-detailed advice on the procedure and costs involved.
For any company with overseas operations, each region in which it conducts business represents a separate set of local regulations and restrictions to be considered and respected. These considerations must often be factored into both their methods of operation and strategic planning. From an HR point of view, the main goal was the integration of the two different groups into the Italian structure and organization in less than six months. In such a way, all the processes being carried out over the world were under the control of a restricted number of people in Italy near the headquarters of the company. Local branches, often with no administrative backup, were not required to search for local consultants and lawyers.
Central monitoring and effective project management
All the law firms involved were already selected using the internal quality control system of the Ius Laboris alliance, either as members or as recommended firms. Consistent fees for the different phases of the operation were agreed before implementing the merger. This enabled the activity of each firm and the local offices to be monitored centrally and ensure effective project management across legal, regulatory and business issues.
Further onward, the two companies again worked directly with their local Ius Laboris member firms on issues that arose from their union. The French required guidance on labor negotiations and the orderly construction and execution of a wide-ranging redundancy policy. The Italian business needed effective management of the due-diligence procedures. With these processes concluded the deal completing the acquisition which was signed half a year thereafter.
Following the merger, many of Ius Laboris’ European members became involved in the assimilation and reorganization of both companies’ local structures, including assessments of employee structures, cost analyses of existing commercial agency and employment contracts, redrafting of employment and commercial agency contracts, termination and settlement agreements for employees, agents and consultants and the removal of managing directors. In particular, special advice and help were requested by the Italian company relating to agency and distribution contracts for the whole of Europe. After the merger, the Italian business moved to centralize its agency contracts in one country.