Protect Yourself In A Merger

Corporate acquisitions, consolidations and mergers continue unabated these days, striking airlines, banks, phone companies and dotcoms. Small, medium and big businesses are all combining with the competition to form larger, more powerful entities.

Wall Street seems delighted, and the government has done little to dampen the urge to merge.

But employees tend to take it on the chin when companies combine. Layoffs often follow on the heels of a merger, with one or both companies shearing off many jobs at all levels.

Administrators, sales people and mid-level managers often feel the brunt of consolidations more acutely than others. Top managers are also vulnerable to falling through the merger trap door.

Most employees caught up in the process lack the leverage or clout of big-time CEOs or athletes and must go with the flow.

Here are some tips employees can follow, however, to avoid the traps of the merger game:

• When businesses combine, the contractual rights and obligations you had with your original employer generally carry through to the new company. So make sure you know what those rights and obligations are. Review any non-compete agreements, confidential provisions including trade secrets and other proprietary data, and similar restrictions.

  If you don't like any of those agreements, this might be your chance to negotiate different arrangements.

• Before you start your next position, try to negotiate a "golden parachute" arrangement that maps out what will happen to you in the event of a merger. These provisions are generally available only to high-level executives, but if you can get one they're good to have, since they're specifically designed to protect you in the event of a "change-in-control."

• If you're a key employee, you may be well situated to negotiate a "stay put" or retention agreement. Under these arrangements, you receive additional compensation (usually in the form of a bonus) along with a guarantee of job security for a certain period of time, if you pledge to stay with the business during the transition period and perhaps for a short while thereafter. Businesses need key employees to stay with their companies while they go through a merger, and they are often willing to pay extra to ensure that vital personnel do not depart early.

• If you're thinking about leaving your company, and you're hearing rumors about a merger, see if you can time your departure to coincide with the merger. If a merger is on the horizon, that'll give you additional leverage to negotiate a buy-out and enhanced severance benefits.

• By the same token, lawsuits tend to carry more clout if a merger is looming. The new entity generally wants to "clean the books" of lawsuits and prospective liabilities as part of the transaction. So if you happen to be suing, you'll probably have more leverage. (That's one reason why whistleblowers tend to abound on the eve of mergers.)

Keep these considerations in mind if your employer is contemplating a merger in today's rough and tumble economy. In short, you've got to look out for yourself, because no one else will.

Marshall Tanick is a partner with Mansfield Tanick & Cohen, a Minneapolis law firm that provides legal services to individuals, families, businesses and organizations nationwide.

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