The situation
A Gujarat packaging maker is buying the plant and customer contracts of a competitor in Aurangabad through an asset purchase, leaving the company itself with the seller. The Aurangabad plant has around two hundred people: permanent staff, contract workers supplied by an agency, and a few supervisors who know every machine. The buyer needs them. The seller wants them looked after. Nobody on the shop floor knows yet.
Share sale or asset sale
In a share sale
The company stays the employer. Contracts, service history and obligations such as gratuity continue as before, because only the owner of the company changes. The buyer inherits any past non compliance, which is why diligence on payroll and labour matters.
In an asset sale or slump sale
The employer changes. Employees move to the buyer under new or transferred contracts, and the agreement must say how service history, accrued benefits and dues are handled. Indian labour law has provisions on transfer of undertakings and on what employees are owed when the employer changes, so the structure must be checked with your lawyer.
What the buyer will check
- Headcount and roles, with contracts and appointment letters
- Provident fund and ESI registrations and contributions, reconciled
- Gratuity liability and how it is funded
- Bonus, leave encashment and other dues
- Contract labour arrangements and the agencies behind them
- Disputes, union agreements and grievances
- Key people, their terms, and any incentive or ESOP arrangements
Gaps in PF or gratuity are common in mid sized businesses. They are usually fixable, but they become price adjustments or indemnities if found late.
Keeping the people who matter
Identify the ten or fifteen people the business cannot run without. They are often not the most senior: a production planner, a quality head, the accountant who knows every customer. Consider retention bonuses paid over twelve to twenty four months, clear roles in the new structure, and an early conversation with the buyer's leadership.
Communicating
- Agree a plan before signing: who is told what, by whom, and when.
- Tell key people before the wider announcement, under confidentiality.
- On Day One, explain what changes and what does not: pay date, reporting lines, location.
- Give managers a short set of questions and answers.
A short checklist
- Structure decided and employee impact understood
- Payroll and labour compliance reviewed in diligence
- Key people identified and retention agreed
- Communication plan in the Day One checklist
- Transfer documents prepared by your lawyer
Where Synerger fits
HR diligence runs in its own folder in the Synerger data room, visible only to the people who need it. The communication plan and retention tasks go into the integration plan with owners and dates. See also a Day One checklist.
General information; employment and labour law questions should go to your lawyer.