What Happens to Employees After an Acquisition?

A business man standing next to a question mark

If you’re an employer, an acquisition is a good thing. This means that your business gained so much revenue and popularity that another larger company sees its potential and purchases it. If you’re an employee, you may have a different mindset about acquisitions. Unlike employers, employees often do not sit back and relax when they hear about this transition. After an acquisition, employees are nervous about their job security, and rightfully so. All of these changes cause confusion and nervousness among employees, and that’s why we’re here to clear things up:

Is there a difference between an acquisition and a merger?

Some people might hear the term “merger” used during an acquisition. This is because acquisitions have a negative connotation, and employers don’t want to use that language around employees. Some employers purposely tell employees that the business is merging (as opposed to being acquired) so employees don’t get nervous about their jobs. Although used together, mergers and acquisitions are different.

A merger is when two companies join forces to create a new management structure and a joint organization. The CEOs from each company typically find benefits from each business and combine their services to create the “ultimate business”. This normally doesn’t work out because of the fact that one person may have to give up some authority; therefore, acquisitions come into play. Acquisitions do not require any merging. A larger company will purchase a smaller company, taking over management decisions, finances, and ultimately taking over the business. Ordinarily, the new business will replace existing employees.

What happens right after an acquisition?

There is usually a brief period of silence after an acquisition. Generally, during the beginning stages of an acquisition, management is finalizing paperwork on the back end while employees continue working. During this time, management will establish new processes, choose different time tracking solutions for payroll, and make financial decisions. In addition to new processes, management will regularly communicate with employees about what is going on. They may meet with employees to inform them of their options and let them know whether they need to take certain steps to ensure their job remains in tact. Ultimately, employees just have to wait and work until changes are implemented.

What happens to existing employees’ jobs after an acquisition?

An employee’s future is entirely dependent on the existing organization. Some new employers keep current staff, while some replace current staff with their own team. The truth is, employees can’t be sure about what is going to happen to their jobs. Often times, core functions such as payroll, human resources, accounting, marketing, technology, and other departments overlap. When departments overlap, you will often find employees performing the same job function. Employers do not have a need for duplicate employees; therefore, they will narrow down the team.

What actions can employees take?

As stated above, most employers will choose to get rid of redundant workers. However, it is important that employees stay hopeful during this period. The acquiring company will often sit down with current employees and discuss their job responsibilities. It’s during this time that employees should indicate what special skills they bring to the table. If they are able to set themselves apart and clearly state their contributions, there is a chance that the acquiring company will keep them on board.

Not only can employees prove themselves to the new employer, but this is also a great time to review employment agreements. Employee handbooks, contracts, and other documents may provide the employee with job protections and extra pay. Most employees have contracts with their current employers, and these agreements may also apply after an acquisition. When employees look through their contracts, here are some things to look for:

  • Severance pay: In some cases, an employer may offer an employee severance pay. For example, an employer may offer a certain amount of compensation if the employment ends during the contact term. Or, in other cases, an employer may offer a week of severance pay for every year an employee worked with the company. 
  • Termination protections: You may find this in the employee handbook or other written policies. An employer may offer an employee protection from layoffs or terminations. This means that termination can only happen with good cause. 
  • The survival clause: A survival clause is part of a contract that exists after the contact has been terminated. The survival clause dictates what happens to the employee contract and how it will be handled. There’s a chance that the survival clause may restrict the employee’s termination.

What is the termination process?

Most employees who are let go during an acquisition are put through a career transition process. The termination period can vary anywhere from 30-90 days. They will take care of terminations with procedures, guidelines, scripts, and forms. Additionally, an employer might even help employees find new employment through special employment programs so that they aren’t left without direction.

What happens to an employee’s pay and benefits?

Unless an employee is under a specific, legally binding contract, the new employer may reduce pay and benefits. This means employees may get a new time off policy with accruals, they might receive adjusted pay, may be expected to work different schedules, and may see different bonuses and other additions.

Not only will benefits and pay change, but employees will change retirement and healthcare plans as well. Employees will most likely have to change their healthcare and retirement plans to match other employees. Putting people on the same plan will help their management process. In regards to current retirement funds, employees do not have to worry. Although employees will most likely change retirement plans, the Employee Retirement Income Security Act (ERISA) will provide protections. They will ensure that employees do not lose the credit they’ve worked for.

Next Steps

If you are an employee and the business you work for gets acquired, it’s not the end of the world. The best thing to do is stay calm and review your rights, skills, and protections. It’s not guaranteed that you will be terminated, but it’s a good idea to familiarize yourself with your handbook and contracts to make sure that you understand your rights and solidify your job security. If you are ever unsure as to what is happening, try to speak with your manager or supervisor to obtain information. Transparency is a great thing to have when you’re going through this transition.

If you’re an employer, you’ll want to take this time to focus on communication with your employees. Although you may not have all the answers, assisting your employees and contributing to their peace of mind is the best you can do. Additionally, during an acquisition, employers should look back on their notes about their employees’ performances. As an employer, you can potentially help an employee prove that they deserve to stay at the company. If you can provide the employee with annual reviews, positive notes, and performance evaluations, they will have accurate documentation to support why they’re an asset to the company. Timesheets.com, for example, has an HR suite where employers can store performance reviews, commendation letters, notes, and annual reviews. This is incredibly helpful information to have when you want an overview of an employee’s progress.

Need to track employee attendance, time off, projects, expenses, and more? Try Timesheets.com for FREE now to see how it works!

45 Responses

  1. what happen to the employee hire date after acquisition? will the employment date is the day they acquire the company? or was it from the Actual hire date?

  2. if I signed a severance package contract and the company was acquired by another company is that contract still valid?

    1. Hi Fletcher. Unfortunately, there aren’t many rules when it comes to severance packages. I would suggest that you speak with a legal counsel about your issue.

  3. Hi Lindsay. In a merger, can the new management reduce the salaries of the employees with higher rate of the previous company?

    1. Hello. In mergers, employers may give their employees new agreements regarding pay, benefits, time off, and more. If your new employer is trying to reduce your salary, there’s a chance that it is legal. If I were you, I’d speak directly with an employment Lawyer to review any of your previous contracts or agreements to see if your previous pay or other benefits are protected.

  4. what if your comapny aquires a new company – can the new companies employees take over your current role with the aquiring company?

    1. If you’re an at-will employee, your employer can terminate you at any point as long as they’re not doing so in a discriminatory fashion. Meaning, there is a possibility that your new company can replace you with another employee from the acquiring company.

  5. when the new company comes in do all employees start from new?. meaning disciplinary files are purged from the old company?because the old company doesnt exist anymore after purchase will new employees start as day 1 new again?
    we are union employees so we know that are pay and seniority wont be affected.

    1. Typically you would start with new policies when the new company takes over, however, that’s up to your new company. You’d have to speak with new management to understand how things will work at your workplace moving forward.

  6. if we are with the aquiring company – can they replace you with someone from the company they are taking over?

  7. The sales division of my current company got sold and they current offer us an option with a severance package if we don’t take the NEW offer from the buying company. I thought about this potential loop hole – Can I decline the first offering from the new company, take the severance package from the old company and ask the new company to hire me 2 weeks later with a separate offer?

  8. My company was acquired and I do not want to accept the offer of the acquiring company. At I required to submit a letter of resignation to my current employer? I am concerned by doing so will leave me ineligible for EI benefits. What is your advice about the letter?

    1. I’m unfortunately not well-versed with Canadian government policies. I would suggest speaking with your local labor board or potentially contacting the Canadian government office to learn about whether or not your resignation would affect your EI benefits.

  9. Hi, my employer sold the company to one party and sold the building to another party . The party that bought the building said he would “find” all of us remaining a job with his company as long as we stay on board for the transition into this building .

    New company will not discuss job descriptions, salary with us until we accept that we are staying on board through the transition ? What steps should we do to protect ourselves? At this point if we don’t accept them they said we are resigning when in fact we never accepted anything with the new owners .

  10. if the company is acquiring a new company – can the new staff take over your role

    that is im working for a company that is taking over a smaller company with more experienced staff and im wondering if they could take over my current role?

  11. Hi Lindsay, Allied Universal has just completed it’s acquisition of G4S and will complete the transition sometime in Q3/Q4. G4S pay is currently under contract by Bank of America, but after the integration of the two companies, would the salary contract no longer be valid?

  12. My current employer is “emerging” into another company. The new job offer is completely ridiculous, we are being offered a lower pay, more work, and no benefits. I am being forced to apply to this job and if I don’t apply I am resigning which disqualifies me from collecting unemployment when the my job ends. If I apply and they accept me, I am being forced into a job I never wanted, job description was never clear, lower pay rate, and no benefits, which was the reason why I was with the original company to begin with. Can they force me to apply?
    Is there a way I not apply, and just look for another job somewhere else, while I still qualify for unemployment meanwhile?

    1. I am unsure that an employer can force employees to start working for the newly acquired company, but they can certainly offer the employee a position for the new company. That employee can either deny the offer or accept the offer. For further assistance, you may want to speak with an employment attorney to see if the acquisition is breaching any contracts you may have. That’s something that only they can help you with. Regarding unemployment, it’s really a case-by-case scenario. You can apply for unemployment at any time, but they may deny your request if you chose to leave your job on your own. You also may want to speak with a UI office in your area to see if you qualify. Most people just apply and get denied if they aren’t approved. They can then submit an appeal for their denial if needed.

  13. My company was acquired and doesn’t exist anymore. The new company rehired me and laid me off 3.5 months later. How many employers should I claim while applying for the unemployment?

  14. Hello.
    My hospital was bought by a larger company. I just started with this hospital two months ago and signed a contract with the hospital when I started. Is my contract now void or does it still stand with the new company purchase?

  15. I work in california.I was fired from my old employer about 7 years ago. I have worked for my new employer for 6 years and have numerous licenses and awards with the company. Now the company is being acquired by the company that fired me. They stated in a press release they will keep our job family with the company after the acquisition. Will they still terminate me since I was terminated with the company? Are there any protections for aquired companies in california?

    1. That’s a great question, but pretty unique so it’s difficult to answer. I don’t think the company needs to retain you, unless they put it in writing somewhere, specifically. That being said, terminating an employee in California is never easy, but not impossible. It might be worth brushing up the resume. People are hiring right now, so at least it’s coming at a decent time.

  16. I have security plus time accrued with my current employer that I was going to use for surgery. Our company is being bought out by HCA and they are not going to roll over the existing bank and the old company will not pay out this benefit to us. Is it legal for them to just take it away from us?

    1. It depends on the type of time. It’s not the kind of thing we could answer. Vacation time is usually granted and becomes something you own. Sick time is usually not paid out when you leave a company. It’s granted in case you get sick, but otherwise often has no value. It’s something you’ll need to discuss further with your employer to understand how your compensation works.

  17. If I work for a company as a full time employee and then a new owner takes over the company can they switch me to a contract (1099 compensation) and reduce my pay without telling me or asking me?

  18. I work for 2 companies Allied and G4S…..i do 40 hours at both jobs so that’s a total of 80hours a week. It was a problem until Allied is taking over G4S company so now they are telling me I can’t work 2 jobs any more because the 2 company has now become 1 company. Is this legal that I have to choice only 1 and can’t do both? I work in 2 separate buildings and 2 separate shifts. And I’ve been working both jobs for 3 years no problem until now that they are going to merge.

  19. Hi Lyndsay. I’m in Kentucky and our company has recently been acquired twice in a short amount of time (was initially a 140 year old private equine veterinary practice) that has sold and gone corporate. All our benefits have and PTO has changed dramatically during this time causing a major lifestyle change and disruption to my pay, affecting my pay and accrued time off from the old company and the original private practice I was hired onto over 22 + years ago. The billion dollar company that has acquired us is having spontaneous impromptu town hall style company meetings giving no constructive notice of said meetings to inform the employee’s of new policy and procedures. My question is what are my Rights in Kentucky as an Essential (equine nurse) worker/employee in animal health care, trying to survive during these corporate acquisitions as they are imposing what will be major financial lifestyle hardships ergo: loss of health care benefit’s and major loss of earned PTO.

  20. If I’m on a vested shares schedule, where I gain the shares promised to me at hire over a 4 year period, when my company is acquired, I assume they have to pay anyone with shares the price per share, is there a responsibility to my uninvested shared to get paid out or are they just gone?

  21. My current company will be acquired soon and there is this panic tension amongst us. Will my current employer pay us off? And after that, is it possible for the acquirer employ us?

  22. The company I work for is due to be taken over in April. The new company have guaranteed my contracts and working terms till the end of 2022.

    My question is, What date can I expect my new owner to offer me a new contract or new working terms?

  23. A new company purchased ours, my job is certainly not redundant, but I do fear they will let me go because I make more than they would like to pay for the position. How long after acquiring a business can they “lay me off” because of financial reasons to the company due to the merger? Basically, is there a time frame to pass where they cannot use the acquisition of the business as a reason to fire you?

    1. That would be a local law, most likely, or a state law. That being said, I haven’t ever heard of such a requirement. I wouldn’t expect there to be any grace period or firing freeze mandated by the government after a purchase or merger or really for any other non emergency reason.

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