Business for SALE? Handle with care!

EWC’s essential role when a divestiture is planned

European Works Councils (EWCs) are information and consultation bodies, representing employees in European multinational companies. As such, EWCs have to deal with a wide variety of topics and developments. Ranging from restructuring, reorganizations, and lay-offs to investments and acquisitions.

And then there are the divestitures.
A divestiture is a rather specific situation in which a company decides to divest/sell-off  a part of its business. This happens regularly, and over the years I have been able to support numerous EWCs in their handling of such divestitures.

Divestitures aren’t always bad news

If a company – or a part of the business – is suddenly put up for sale, the people working at this business are often in shock. They feel ‘discarded’ or ‘disposed of’, no longer wanted, needed, or loved by the mother/holding company. This brings sadness as well as a lot of uncertainty for employees. And for the EWC it brings a lot of work, especially if you want to do it right. As an EWC your role is to represent your colleagues during this whole process, to make sure that the people at the divested entities will have the best possible future with the new owner, as well as safeguard the future of the remaining entities and employees.

Most important steps in the divestiture process

There are many legal consequences, rules and regulations to take into consideration when dealing with divestitures. I don’t want to bother you with all the legal details, but I would like to explain the most important steps that you can take as an EWC:

• Employees are often concerned about the terms & conditions of working under a new ownership. Rest assured that, by European law – transfer of undertaking – automatically all terms & conditions need to be taken over and respected as well. However (as always) there are some exceptions, so it is good to make an overview of all the terms and conditions involved, both for the present ownership as well as for the new one. It’s a good idea to bring all this information into the so called ‘data-room’ for the buyer to see.

• Once the EWC has been informed about the intention to divest a part of the business, you as EWC can develop a question portfolio. This involves a range of questions about the sales process and timelines, involvement of the EWC,  due diligence (data-room), the financial profile of the buyer (Strategic buyer of Private Equity), financial structure of the acquisition (how will it be financed), and under which terms & conditions the business will be divested.

• Normally, a divestiture process is quite long and can easily take 9-12 months. the EWC must try to plan several meetings with management to regularly stay updated about the process. Topics to discuss are: process of disentanglement from the mother company, due diligence process with the buyer, transfer of people/assets, process with the European competition authorities.
  
• Once the company has identified the buyer it’s then of the utmost importance to obtain a meeting with the buyer(s). Such a meeting offers the best possible opportunity to get to know the new owners, to hear firsthand why they want this part of the business, how they want to grow/invest, and how they will create a future for this business and it’s employees.

• Based on all the information received during this process and the confirmations of the buyer, you can then write a formal EWC statement to be shared with the employees of the divested part of the business. Make sure that, during this process, you also connect with the local works councils and unions to be aligned, to understand the most critical issues, and to strengthen each other in the process. 

A divestiture is not necessarily a bad thing; when handled properly and with an EWC that is involved, competent, and on top of its game, it could offer great opportunities for both the employees who are leaving as well as for those who are staying.