HR lawyers’ role in a successful globalmerger

Firms need to get a grip on the legal realities of cross-border operation

Aldo Bottini and Lea Rossi

Aldo Bottini andLea Rossi are both basedat Toffoletto De LucaTomajo, Milan, Italy.

The collaboration between a united group of lawyers and human resources (HR)departments across numerous jurisdictions has helped companies successfullyovercome the HR challenges of mergers and the subsequent integration of the

businesses.

In an increasingly integrated global economy, businesses and their employeesprogressively find themselves obliged to think and act in accordance with their company’sbusiness strategy, which frequently transcends national borders. Businesses need toappreciate 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.

For any company with overseas operations, each region in which it conducts businessrepresents a separate set of local regulations and restrictions to be considered andrespected. These considerations must often be factored into both their methods ofoperation and strategic planning.

As constituent HR departments serve and protect the interests of both employees and thebusinesses that employ them, it has become increasingly important for HR to be aware ofthe cross-border vision and to have easy access to legal and regulatory expertise that canbe relied upon when required.

Last year, a major multinational fashion company based in Italy found itself in need ofcontinuous day-to-day legal help for a major multi-jurisdictional project that would clearlyaffect the firm’s internal and external policies.

The company had been strengthening its international position since 2004 throughexpansion into overseas markets. This expansion was rapid and, initially, trouble-free.However, difficulties arose with respect to intra-jurisdictional coordination; the companysoon 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 ofthe scope of help that was needed and the type of consultant or lawyer that would suit itsrequirements. The process of identifying and approaching individual firms in numerousjurisdictions 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 ofEuropean law firms offer overseas operations, fewer possess networks extensive or

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comprehensive enough to offer support and localized proficiency in every market thecompany had penetrated in Asia, the Middle East, Africa, Latin America and Australia.

Following the worldwide merger, which would see the company integrated with a majorFrench manufacturer, the number of countries in which the business would operate wouldsignificantly increase. Selecting the legal advice that could contribute to the growth of thebusiness was significant.

The company chose the Ius Laboris HR law firm alliance to help with the merger. The allianceis present in 125 cities across 44 separate jurisdictions. Companies have access to 1,300specialized labor and employment lawyers whose clients include Fortune 500 companiescovering 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 providelocal legal expertise committed to solving HR issues on a global scale.

The employment and labor law issues facing businesses may be global, but their solutionsfrequently need to be adapted to local market conditions. This was paramount during thismerger, between the Italian group based in Milan and the smaller French group based inParis. 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 HRviewpoint, the main goal was to integrate the two different groups into the Italian structureand organization in less than six months.

Before the merger, the HR directors of the two businesses reached out to the Ius Laborismember 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 differentcompany requirements, Ius Laboris decided, together with the international HR directorand his team, to activate two centers of direction.

One was based in Paris and would deal mainly with the substantial and complicated issuesregulated by the French law, in addition to the social plan for after the merger. The secondcenter would be in Milan and would co-ordinate all other activities in the operations andbranches in Italy, Spain, Portugal, Germany, Ireland, the UK, Switzerland, Japan and othermarkets outside Europe.

The centralized help from Italy coordinated the entire due-diligence process, including thedata room and all documentation, and reported on the operation by using a practical andsingle 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 andproject 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 contactcolleagues from the Ius Laboris alliance in other jurisdictions was decided to havemore-detailed advice on the procedure and costs involved.

For any company with overseas operations, each region inwhich it conducts business represents a separate set of localregulations and restrictions to be considered and respected.These considerations must often be factored into both theirmethods of operation and strategic planning.

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In such a way, all the processes being carried out over the world were under the control ofa restricted number of people in Italy near the headquarters of the company. Localbranches, often with no administrative backup, were not required to search for localconsultants and lawyers.

Central monitoring and effective project management

All the law firms involved were already selected using the internal quality control system ofthe Ius Laboris alliance, either as members or as recommended firms. Consistent fees forthe different phases of the operation were agreed before implementing the merger. Thisenabled the activity of each firm and the local offices to be monitored centrally and ensureeffective project management across legal, regulatory and business issues.

Toward the end of 2012, the two companies again worked directly with their local IusLaboris member firms on issues that arose from their union. The French required guidanceon labor negotiations and the orderly construction and execution of a wide-rangingredundancy policy. The Italian business needed effective management of thedue-diligence procedures. With these processes concluded the deal completing theacquisition which was signed in February 2013.

Following the merger, many of Ius Laboris’ European members became involved in theassimilation and reorganization of both companies’ local structures, including assessmentsof employee structures, cost analyses of existing commercial agency and employmentcontracts, redrafting of employment and commercial agency contracts, termination andsettlement agreements for employees, agents and consultants and the removal ofmanaging directors.

In particular, special advice and help were requested by the Italian company relating toagency and distribution contracts for the whole of Europe. After the merger, the Italianbusiness moved to centralize its agency contracts in one country.

Note

Aldo Bottini is a partner at Toffoletto De Luca Tamajo, the Italian member firm of Ius Laboris.Bottini advises national and international clients on aspects of international employment,corporate restructuring, individual employment contracts, hiring of managers, agencycontracts and litigation. He works closely with other members of Ius Laboris ontransnational employment projects and queries. Aldo Bottini is the corresponding authorand can be contacted at: sab@toffolettodeluca.it

Lea Rossi, Senior Associate at Toffoletto De Luca Tamajo, provides preemptive legalsupport in Italian, French or English, with a focus on employment contracts and union law,collective procedures, agency contracts, expatriates, compensation and benefits,trade-union law, discrimination and immigration.

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From an HR point of view, the main goal was the integration ofthe two different groups into the Italian structure andorganization in less than six months.

Keywords:Law,Fashion industry,Mergers and acquisitions,Human resourcemanagement

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