Before buying a business, review its workforce structure, employment contracts, payroll costs and reliance on key employees. Staff can be one of a business's most valuable assets, but existing employment obligations may also affect the acquisition. Understanding these commitments helps buyers assess operational stability, potential liabilities and the likelihood of retaining important employees following completion.
Focus on three areas:
- Employment contracts and costs: Review employee contracts, salaries, pension contributions, bonuses, holiday entitlements and any outstanding employment disputes or liabilities.
- Key employees and management: Identify employees who hold essential knowledge, manage important customer relationships or play a critical role in day-to-day operations.
- Legal obligations: Establish whether the Transfer of Undertakings (Protection of Employment) Regulations (TUPE) apply. In many business asset acquisitions, employees and certain employment liabilities may transfer automatically to the new employer.
For example, if a business relies on a small number of experienced employees, their departure after the acquisition could disrupt operations or customer relationships.
An employment solicitor or other qualified advisor can help identify obligations and potential risks before completing the purchase.
Read more: Due Diligence Checklist for Buying a Business
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