Mergers and acquisitions (M&A) involve significant internal changes in the companies involved, so it is necessary to look at labor issues at all stages of the process.
For a long time, approaches to labor issues in M&A transactions were limited to quantifying liabilities by analyzing employment contracts, benefit plans and internal policies.
However, changes in legislation and the expansion of inspections by the Labor Prosecutor’s Office point to the need for issues related to moral damage, both individual and collective, to be thoroughly examined and evaluated during due diligence and negotiations.
The occurrence of a Conduct Adjustment Agreement or the correction of certain practices can have a major impact on operating costs and business profitability. Therefore, an analysis of internal policies, the structure of whistleblowing channels and the procedures for investigating complaints became essential during the due diligence process.
For the contingency of amounts, which may be deducted from the price, the expenses necessary to adopt procedures to correct the irregularities and the amount of the fines should be used as a basis, taking into account the number of employees involved. Specifically in relation to collective moral damage, given the possibility of arbitrating amounts without any parameter or relation to objective or easily quantifiable criteria, the amount should be set by estimate.
The due diligence process must provide the parties involved with adequate information about the risks involved, and issues involving means to curb the practice of moral damages are fundamental to analyzing the viability of maintaining the business model adopted and the company’s operational profitability, directly impacting the M&A operation.
