Retaining Staff During an Acquisition

Q. I am purchasing a telemessaging call center and will be retaining the existing staff. Since the purchase has not yet closed, what should I be aware of in terms of my obligations and the seller’s obligations regarding the employees?

A. If you will be retaining the staff, one of the most important things needed from the seller before closing is a list of all the employees detailing their salary work history, schedule, accrued vacation, sick pay accruals, benefits, and hire dates. A buyer should be as familiar with the employees as possible before the actual closing date.

In addition, the purchase agreement should state that the seller will compensate the buyer for the employees’ earned and accrued vacation and sick pay. This can either be in a separate check at the closing or deducted from the purchase price. The agreement should also state that the buyer assumes no responsibilities to previous employees regarding pension plans and other related commitments. The seller should also be responsible for all wages, bonuses, state and federal withholding, group medical and life insurance (if existing), benefits, and other taxes through to closing. The seller shall also continue to remit all sums due to governmental entities or any other parties arising out of such employment through the closing date of the sale.

At closing, the buyer should receive from the seller all copies of personnel files of the employees and any restrictive covenants signed by the employees. The buyer should have all documentation prepared for the new employees, such as W-4s, I-9s, employee manuals, and nondisclosure and confidentiality agreements.

The main intent during a business sale is to have a clear understanding of the responsibilities of both seller and buyer. Having a list of responsibilities for each party, along with the needed completion dates, helps keep the process orderly and efficient. This also helps eliminate any gray areas of doubt with new employees and gives them a good impression of the capability and quality of the new owner, hopefully ensuring a good future working relationship.

Christine Michaels is an associate of TAS Marketing. Her main area of expertise is assisting buyers and sellers to draft the legal documentation necessary for closing the sale of a business.

Steve Michaels

About Steve Michaels

Mr. Michaels owned his own telephone answering service in Palo Alto, California and was the founder and publisher of the Connections Magazine. He has personally published over 200 TAS related articles including a monthly segment called "Mind Your Business" which was featured in Connections Magazine. He also e-mails a highly regarded newsletter called "TAS Tips" to over 1500 businesses. Steve has been a speaker for this industry and has worked for 4 major TAS/Voice mail companies including a manufacturing company, which he helped to take public.