Global employment issues in M&A transactions and post-acquisition integrations

Series introduction

We have seen a high volume of deal activity involving Israeli companies in 2026. With cross-border acquisitions, mergers, and integrations becoming more common, global employment issues have featured more prominently in transaction planning and execution. Whether a multinational acquirer is purchasing an Israeli startup or an Israeli company is acquiring operations overseas, employment law considerations may affect deal value and often involve complex, jurisdiction-specific requirements.

Global employment issues in M&A transactions and post-acquisition integrations is a two-part series examining key global employment issues that may arise during merger and acquisition (M&A) transactions involving Israeli companies. 

This first article in the series focuses on employment considerations at the transaction stage, including employment due diligence, deal structuring and employee transfer mechanics, works council and union obligations, and addressing employment issues in transaction documentation. 

The second article addresses employment issues that could arise during the post-acquisition integration (PAI) process, when companies begin implementing workforce changes and operational adjustments following closing. 

Employment due diligence considerations

Global employment due diligence plays a central role in cross-border transactions but is sometimes conducted superficially or deferred. This can become a material issue if, following pricing or signing, an acquirer discovers unanticipated employees, disputes, or undisclosed liabilities. A comprehensive review early in the process may include:

• In-scope employee headcounts by jurisdiction and entity 
  
  
• Information on works councils, unions, and other employee representative groups, in each affected jurisdiction 
  
  
• Information on collective bargaining agreements, works council agreements, or other collective agreements
  
  
• Policies and template employment agreements
  
  
• Compliance with wage and hour requirements, such as timekeeping or overtime rules
  
  
• Change-in-control and severance provisions 
  
  
• Terms and conditions of employment or benefits that could present compliance issues, including potential liabilities under defined benefit pension plans
  
  
• Any pending or threatened claims, litigation, investigations, or audits 
  
  
• Other areas that may give rise to employment liabilities depending on the nature of a company’s operations, including the use of artificial intelligence in employment processes, health and safety obligations, or immigration compliance 
  
  
• Information on contingent worker or contractor arrangements

Data privacy laws are also a relevant consideration. Many jurisdictions, including those subject to the European Union’s General Data Protection Regulation and Israel's Privacy Protection Law, restrict the exchange of personally identifiable employee data during due diligence. In such cases, redaction or anonymization of personally identifiable information may be required before disclosure.

Country-level deal structure and employee transfer methods

Employment issues in cross-border transactions vary depending on the nature of the deal and the employees’ geographic locations. The transaction structure at the outset is relevant when determining how employees will transfer and identifying potential jurisdictional constraints. 

The structure of the transaction at the country level typically determines whether and how employees transfer from one entity to another. A common misconception is that the parent-level transaction, whether in Israel, the United States, or another jurisdiction, dictates the method of the local employee transfers.

In a share or stock sale, employees generally remain employed by the same legal entity. In a merger or asset sale, employees typically must transfer to the employing entity on close. The mechanics of that transfer depend on applicable local law.

In a merger, the transfer is often automatic. Asset deals, however, often involve more complex processes. In the US, even in an asset deal, employees can be moved through a relatively straightforward termination-and-rehire process. However, if the terms and conditions with the new employer differ significantly and the number of transferred employees reaches certain legal thresholds, the Worker Adjustment and Retraining Notification Act (WARN Act) may impose a 60-day notice requirement for certain government agencies and employees.

Outside the US, matters may be less straightforward. Many countries, including Israel, generally apply a termination-and-rehire approach. In these jurisdictions, particularly across the Middle East and Asia-Pacific, any termination, even when followed by immediate rehire, may trigger notice and/or severance pay obligations and local practice may dictate how these are structured (e.g., resignation and rehire, mutual termination and rehire, or similar mechanisms). 

Other jurisdictions apply different legal frameworks for employee transfers that differ from termination and rehire. For example, in many Latin American countries, an employer substitution concept may apply, under which employment contracts transfer to the buyer without termination, typically on existing terms and conditions. In the EU, the Acquired Rights Directive (ARD) requires that employees transfer automatically where an asset sale qualifies as a business transfer, which is often the case, but involves a fact-specific analysis. Employees generally transfer on existing terms and conditions as a matter of law, with limited exceptions, such as certain pension or equity arrangements. Similar rules apply in Québec, South Africa, Singapore in some cases, Korea, Switzerland, and the United Kingdom (UK) under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE). Accordingly, assessing employee transfer methods on a jurisdiction‑by‑jurisdiction basis is often a necessary step. 

Works councils, employee representatives, and unions

Companies are also encouraged to consider obligations relating to employee representatives, works councils, and unions. Under the EU’s ARD and the UK’s TUPE framework, employers are required to notify and, possibly, consult employees affected by the transfer. While implementation varies across EU Member States, consultation, if required, typically occurs through works councils or other employee representative bodies. 

In some jurisdictions, these bodies have significant influence. In France, for example, a business transfer cannot proceed until the works council has issued its opinion, and failure to consult may carry criminal consequences. In Germany, works councils may have co-determination rights and, in some cases, may seek injunctive relief to delay a transaction. Acquirers may account for these procedural requirements in their transaction timelines, which can take weeks, if not months.

Coordination across functional teams

One common challenge in international M&A transactions is insufficient coordination between human resources (HR) and other functional teams, such as corporate, tax, benefits, or equity teams. Misalignment can contribute to impractical timelines, uncertainty regarding transaction agreement obligations, or misunderstandings about how corporate structure affects employee transfers. 

Employment considerations in the purchase agreement

To address these challenges, employment considerations may also be reflected in transaction documentation. Purchase agreements may address issues identified during employment due diligence through tailored representations and warranties, including matters related to worker classification (i.e., the correct categorization of employees versus independent contractors), pending or threatened employment claims, and the status of works council or union relationships. 

Where the transaction triggers employee transfers, the purchase agreement may clearly specify the applicable transfer method by jurisdiction, allocate responsibility for notice and severance obligations, and specify which entity will assume ongoing employment liabilities. Transaction documents may also account for works council and employee representative consultation processes by incorporating appropriate timelines and mechanisms to address potential delays. In some cases, the purchase agreement should include tailored indemnification provisions covering key employment risks – for example, indemnities for liabilities arising from the misclassification of workers or undisclosed employment claims or litigation. These provisions are typically developed with input from local employment counsel in each affected jurisdiction to address enforceability and scope considerations. Integrating employment considerations into the purchase agreement at an early stage may help prevent gaps, reduce post-closing disputes, and ensure that the deal documentation reflects the realities of the global workforce being acquired.

Conclusion

Global employment issues can serve as major components of M&A transactions. By addressing employment diligence, employee transfer mechanics, and employee representative obligations, companies may mitigate risk and better influence how transactions are structured and executed. Coordination among employment, corporate, tax, and other advisory functions, as well as consideration of employment issues in transaction documentation, could provide additional visibility into potential constraints as transactions progress from signing to closing to help ensure a smoother path from signing to closing.

DLA Piper advises on global employment considerations that could arise in cross border M&A transactions and the PAI process. For additional information on the topics discussed in this article, please contact the authors.