With upstream activity accelerating globally, the oil and gas sector has found an increased appetite for mergers and acquisitions (M&A). In the US alone, the tally for M&A activity, for 2018’s third quarter was USD 32 billion of activity, up from USD 9.1 billion in Q2. However, an uptick in this brings challenges too, not least in terms of workforce global mobility.
Global mobility is a broad term, essentially referring to the range of services required when relocating teams and individuals, both domestically and internationally. These services encompass visa and immigration coordination, employment and tax consulting, and day-to-day lifestyle management of benefits such as utility bills or/and children’s school fees.
M&A often means restructuring management teams, relocating staff and consolidating service providers, bringing risks to the new-look business if mishandled. Airswift is well placed to share advice on how M&A can affect a company from a global mobility standpoint, having been through the process in 2016 when Air Energi and Swift combined to create what is now known as Airswift.
Below we dive into how companies can circumnavigate the M&A pitfalls from a global mobility perspective.
Ownership and local content rules
The chances are both companies involved have spent significant time ensuring compliance with jurisdictions’ varied ownership and local content rules. These best-laid plans may be thrown into disarray by M&A.
For example, many countries require a local company to own 51% of the legal entity operating in country. As assets change hands, it’s important to ensure the new company adheres to the existing rules. Additionally, there may be a trickle-down effect on employment as entities shift ownership and local content laws still must be complied with.
HR professionals in the new entity should begin by:
- Collating copies of existing employment agreements across the two original companies.
- Map employees according to nationality.
- Understand employees’ tenure, current permit and visa status.
- Use the above to identify and flag potential issues.
Keep an eye on these factors and work with colleagues in relevant departments, as decisions about who to keep, move or let go after M&A activity are often financially driven. With all this information, workforce professionals can make informed decisions and act decisively.
When and how to involve HR
HR is often treated as a second-order priority, however, involving this function early can prevent a lot of headaches.
HR professionals are well-equipped to assist in mapping out the new organisation’s structure, communicating changes in responsibility or reporting lines in merged or newly created teams and creating transition plans.
The M&A event may create new roles, involve some redundancies or prompt international relocations. HR professionals aid recruitment, handle employment packages and severance payments or country payments triggered by moves. Ones experienced in global mobility can also plan the best time to move in terms of tax implications according to local regulations. The US’s IRS, for example, now counts moving expenses as salary payments for tax purposes.
It’s also worth noting that M&A events don’t fit neatly into the financial year. Six-month merger plans may easily cross into a new year, creating a further planning burden for HR and finance teams in terms of tax and immigration status.
New joiners may have notices to work or tax considerations, so it may be advantageous to hold or bring forward a move by a matter of months. Hires may also fall through – in which case a backup plan is invaluable. By involving HR as early as possible in the process, plans can be put in place with strategic timing.
Managing third parties
Each of the companies involved in the M&A activity most likely have a network of vendors, suppliers and partners for various services. Consolidating this list will be high on the new company’s priority list as it is a financial drain to run systems in parallel and can lead to things falling between the gaps.
An immediate way to lessen the drain is to ask the more expensive vendor to align and adopt the terms of the competitors. Vendors are eager to impress and compete for the business of the new, bigger company, and therefore likely to comply.
It’s important to get started early as vendor contracts typically feature long notice periods and heavy penalties, making the transition to a single vendor a six to twelve months process.
Though it may seem counterintuitive to bring more parties to the table at a time of consolidation, there is an argument for engaging a particular partner at this point: a workforce solutions provider specialising in global mobility.
This partner should have the experience and expertise to manage the aforementioned complexities while being solely focused on the change programme, without day-to-day responsibilities on top.
However, it’s important to get the right partner. There are two main items of guidance at this stage.
First, ensure that the partner has actual experience and capabilities in all countries involved. Many claim global coverage but then rely on an opaque supply chain to deliver.
Second, check the balance sheet to ensure the firm can meet the fiduciary responsibilities. Engaging a partner with scant resources to cover the services offered is a major risk.
Whether engaging a third party to help manage the period of change or not, M&A events are difficult times from an HR and global mobility perspective. We understand this challenge from our work for clients and our own experience of a merger. However, the core element of M&A success boils down to one point: create cross functional groups in every area upfront and early on, and allow them to fully focus on the change, without additional day-to-day responsibilities. Get that right, and you’ll be better positioned to not acquire any global employment issues as part of the bargain.
Rachel Twining, Group PMO Director, joined Airswift in 2010, focusing on major client accounts in the US business. She quickly moved into the role of Commercial Director for the United States overseeing all operational functions and servicing established client accounts. She spent 2016 in Singapore serving as the Commercial Director for the Asia Pacific and Australasia regions. She believes in a solutions-oriented approach to driving increased productivity and efficiencies on all projects in the Airswift portfolio. Twining was responsible for leading integration efforts in the Airswift merger between Air Energi and Swift Worldwide Resources.