Typically M&A is about acquiring or merging businesses and companies. More and more often, it is and will increasingly continue to be about people: founders, leadership, management, key employees, employees with specific skills and expertise. Naturally, this will further complicate valuations, since many variable factors are to be accounted (all personal circumstances will likely differ and require flexibility, no one-size-fit-all).

Similarly, legal analysis and risk assessment need an upgrade to address the new emphasis on key people. In the context of a M&A transaction, the basic options for existing management and employees include: (a) retaining them in the continuing business under the same or modified terms and conditions; (b) dismissing categories, groups or individual employees, subject to the applicable labour laws per jurisdiction and group or individual employment contracts; or (c) various combinations or complex ad hoc schemes of structural or contractual arrangements (that may differ in the different countries in the case of a cross-border multijurisdictional transaction).

Transactional lawyers are fully aware that this ever more important angle requires cross-functional multi-disciplinary teamwork and the expertise and knowledge of specialist non-transactional lawyers, human resources and industry experts, etc. The transaction agreements will not be sufficient in themselves – as at signing the relevant contracts with the key people (groups or individuals) must also be in agreed form and substance/material terms, and attached as integral parts of the master transfer agreement. Timing of the signing and closing will be affected, since [x] number of contracts will have to be (re)negotiated and agreed, org charts and internal structures will have to be adjusted or designed, with clear implementation plans in place.

The drive and motivation of those people adds substantial value to the acquired business. It is transactional lawyers’ responsibility to put in special efforts to preserve and maintain such value under the proper terms that are satisfactory to the acquirer.