Employment essentials: top five private company M&A tips from an employment perspective

Acquisitions and disposals often transform businesses, but can also give rise to significant employment-related considerations. Buyers want comfort that they are acquiring a business capable of continuing business as usual, without any unexpected costs or liabilities that were not reflected in the purchase price or commercial terms. Meanwhile, sellers are focused on ensuring a smooth transition for employees and securing a clean break in respect of employment liabilities moving forward.

Here are five tips to ensure a smooth M&A transaction from an employment perspective:

1. Identify the key people

Identifying key employees early in any sale process is crucial. These individuals often hold critical knowledge, relationships and skills that are vital for business continuity.

Sellers should prepare a list of key personnel and consider appropriate retention measures to ensure that they remain engaged throughout the transaction.

Buyers should assess the significance of these key employees, consider the adequacy of their restrictive covenants and develop post-acquisition retention plans.

2. Understand TUPE Regulations

The Transfer of Undertakings (Protection of Employment) Regulations (TUPE) protect employees' rights when a business changes hands. TUPE will not apply to every transaction, so it is important to first establish whether it does and, if so, then consider the obligations that follow. Where TUPE does apply, understanding its implications is essential to ensure compliance and avoid legal risk, and both seller and buyer will need to negotiate and clearly define the scope and parameters of liability for the roles affected.

Sellers should identify roles that are likely to fall within the scope of TUPE, prepare employee liability information for those positions, and inform and consult with employees about the transfer and its implications at the appropriate time.

Buyers should be prepared to inherit employees on their existing terms and conditions and should assess whether the transferring workforce is aligned with the business' operational requirements.

3. Review contractual obligations and benefits

Undertaking a comprehensive review of the contractual employment terms and all associated benefits (including any employee incentive arrangements) is essential. This includes identifying provisions that may have a material impact on the proposed acquisition or future business costs. This includes enhanced benefits or entitlements, bonus arrangements and other terms that result in additional costs or compliance obligations, particularly where TUPE applies.

Sellers should ensure that all employment contracts are compliant with relevant laws and accurately reflect the terms on which employees are engaged and prepare a clear schedule of all benefits and entitlements offered.

Buyers should conduct thorough due diligence to identify any contractual obligations that may impact the transaction, such as severance packages, bonus entitlements or enhanced benefits, and consider the practical and financial implications of continuing these post-completion (especially if employees transfer under TUPE).

4. Assess historic and potential claims, disputes and investigations

Historic or potential employment claims can disrupt – and in some cases derail – a transaction. Investigating these risks is therefore a critical element of the due diligence process. This includes reviewing past grievances, existing or threatened litigation and any potential claims or enforcement action that could arise post-completion.

Sellers should disclose all known claims, provide supporting documentation regarding their status or settlement and consider appropriate carve outs for liability arising from actions taken post-completion.

Buyers should assess the likelihood and potential impact of outstanding or prospective claims and consider seeking warranty or indemnity protection to mitigate exposure to these liabilities.

5. Plan for Retention and Integration

Retaining key talent and successfully integrating employees into the new organisation are critical to the success of most transactions. This is best supported through clear communication, thoughtful cultural alignment and providing appropriate support to employees throughout the transition period.

Sellers should work collaboratively with the buyer to develop effective retention plans for key employees.

Buyers should prioritise creating a positive integration experience, consider how to navigate any cultural differences and ensure employees feel valued and supported throughout the process.

By addressing these five areas, both sellers and buyers can manage the employment‑related complexities of M&A transactions more effectively, helping to deliver a smoother sale process and a successful integration.

For further insights on M&A transactions, read more here.

This publication is a general summary of the law. It should not replace legal advice tailored to your specific circumstances.

© Farrer & Co LLP, January 2026