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Why a merger may lead to layoffs

On Behalf of | May 17, 2024 | BUSINESS & COMMERCIAL LAW - Business & Commercial Law

Business owners often view a merger as a positive thing. It’s going to make the company stronger or more capable. It should increase the business’s earnings in the long term, as they expands their target audience or the capabilities that the business has.

For this reason, employees may expect that a merger wouldn’t impact their jobs. If there’s more money to go around, the business doesn’t have to lay anyone off just to cut costs. So why are there still often layoffs after a merger?

Job roles and unnecessary overlap

The problem is that multiple people may have the same roles, and it may not be necessary for the company to keep them all employed. Some employees may have to move around within the business, being transferred to new departments. But others may be eliminated if it’s deemed that their position is no longer necessary.

For example, say that two small businesses are considering a merger. Each business only has about a dozen employees, including a social media coordinator. After the merger, it may be unnecessary to have two social media managers to run one singular account, so the business will keep one position and terminate the other. It isn’t that the person being let go has done anything wrong, but their job has simply become unnecessary due to the merger.

Setting up a merger 

Business owners who are going through this process need to carefully consider how it will impact the company and the employees. They also need to know what legal steps to take at this time, with changing ownership structures and other major alterations to the company.