Industrial relations aspects of mergers and takeovers
Europe is currently undergoing a massive wave of corporate mergers and takeovers, a development which is attracting growing interest from industrial relations practitioners, researchers and policy-makers at all levels. This comparative study looks at the industrial relations aspects of the mergers and takeovers phenomenon, examining: the context of EU-level regulation and concern; the regulatory framework governing workers' rights in such situations; the role of public authorities; the impact on jobs and collective bargaining; cross-border mergers and takeovers and the role of European Works Councils; and the views of the social partners. The study finds that mergers and takeovers have major implications for industrial relations, but that the capacity of workers' representatives to intervene in the process varies considerably between countries.
There has been an increase in the number of corporate mergers and acquisitions (M&A s) in Europe in recent years. As indicated by figure 1 below (information from Amdata), the number of M&As rose dramatically at the end of the 1980s and then fell back slightly in the early 1990s before registering an almost unbroken growth from 1993 onwards, exceeding the late 1980s figure by 1997. In 1998, a total of 7,600 European Union-based companies were involved in M&As (according to "Mergers and acquisitions", in European Economy, supplement A no.21, European Commission, February 1999). The booming M&A phenomenon affects all sectors but, since 1993, the number of mergers and acquisitions in the service industries has overtaken those in the manufacturing sector.
In addition, cross-border mergers as a percentage of M&As as a whole have continually increased since 1990, reaching 49.9% in 1998. Nevertheless, the proportion of EU-based M&As has remained relatively stable over the past decade, dropping only slightly from 21.5% in 1990 to 17% in 1998. Cross-border M&A activity has increased sharply in the past few years. According to the United Nations Conference on Trade and Development (UNCTAD) ("World Investment Report 2000: Cross-border mergers and acquisitions and development", UNCTAD, October 2000), in Europe the value of cross-border merger and acquisition-related sales and purchases increased in 1999 by 83% and 75%, reaching USD 345 billion and USD 498 billion respectively. The EU accounted for almost half of global cross-border merger and acquisition-related sales and 70% of purchases, and EU companies were involved in all but one of 1999's 10 largest cross-border mergers and acquisitions.
This process has affected EU countries in different ways. In Luxembourg, 95% of all M&As involve a foreign company, whereas in Greece only 29% do (see figure 2 below). In France, the UK and Finland, M&As tend to be more domestically based rather than cross-border. Moreover, German, French and British companies are involved in the majority of cross-border M&A transactions as either the acquiring or acquired entity. The UK accounts for 25% of all cross-border M&A transactions.
This move towards mega-corporations has been accompanied by the legal and economic restructuring of companies, which very often has a major social consequence for employees.
EU-level initiatives and concerns
Various items of adopted and proposed EU legislation attempt to provide protection and information and consultation rights for employees in the event of company restructuring, which may include M&As either specifically or generally. Furthermore, the current wave of restructuring and M&As has made this issue highly topical among European-level institutions and trade union organisations at present.
Transfers of undertakings
EU Directive (77/187/EEC) on the approximation of the laws of the Member States relating to the safeguarding of employees' rights in the event of transfers of undertakings, businesses or parts of businesses, revised in 1998 by Directive 98/50/EC (EU9806114N), applies to many M&As. It provides that the rights and obligations of the transferor organisation arising from a contract of employment or employment relationship are transferred to the transferee. Following the transfer, the transferee must observe the terms and conditions in any applicable collective agreement until the agreement expires or is replaced. A transfer shall not in itself constitute grounds for dismissal by the transferor or the transferee, though this "shall not stand in the way of" dismissals for economic, technical or organisational reasons entailing changes in the workforce. Employee representatives' status and function are preserved in the transfer. The transferor and the transferee must inform the representatives of the employees affected by a transfer of the date of the transfer, reasons for the transfer, the legal, economic and social implications of the transfer for the employees, and measures envisaged in relation to the employees (where there are no employee representatives, Member States may provide that the employees concerned must be informed in advance when a transfer is about to take place). The transferor must give this information to the representatives of its employees in good time before the transfer is carried out, while the transferee must give such information to the representatives of its employees in good time, and in any event before the employees are directly affected by the transfer as regards their conditions of work and employment. If the transferor or the transferee envisages measures in relation to its employees, it must consult the employee representatives in good time on such measures with a view to seeking agreement.
Council Directive 98/59/EC on the approximation of the laws of the Member States relating to collective redundancies (codifying two earlier Directives) provides that employers contemplating collective redundancies - which occur in the wake of some M&As (see below) - must begin consultations with workers' representatives in good time with a view to reaching an agreement. These consultations must at least cover ways and means of avoiding collective redundancies or reducing the number of workers affected, and of mitigating the consequences by recourse to accompanying social measures aimed, inter alia, at aid for redeploying or retraining workers made redundant. To enable workers' representatives to make constructive proposals, the employer must in good time during the consultations supply them with all relevant information and notify them in writing of: the reasons for the projected redundancies; the number and category of workers to be made redundant; the period over which the projected redundancies are to be effected; the proposed criteria for the selection of the workers to be made redundant (where relevant); and the method for calculating any redundancy payments other than those arising out of national legislation and/or practice. Employers must also notify the competent public authorities in writing of any projected redundancies.
European Works Councils
One of the key aims of Council Directive 94/45/EC on the establishment of a European Works Council (EWC) or a procedure in Community-scale undertakings and Community-scale groups of undertakings for the purposes of informing and consulting employees, is to provide for the European-level information and consultation of employee representatives by multinationals so as to enable "economic activities ? to develop in a harmonious fashion" in an environment where "the functioning of the internal market involves a process of concentrations of undertakings, cross-border mergers, takeovers, joint ventures and, consequently, a transnationalisation of undertakings and groups of undertakings". The Directive's subsidiary requirements list "transfers of production, mergers, cutbacks or closures of undertakings, establishments or important parts thereof, and collective redundancies" as issues on which statutory EWCs - ie those set up where no agreement is reached - are to be informed and consulted. They also provide for information and consultation meetings in exceptional circumstances affecting employees interests to a considerable extent, particularly in the event of relocations, the closure of establishments or undertakings or collective redundancies.
Control of concentrations
Community law (Regulations No. 4064/89, amended by 1310/97, and Regulation No. 447/98) provides that the European Commission must approve concentrations (essentially M&As) with a "Community dimension". The Commission assesses the proposed concentration in the light of competition criteria. Recognised workers' representatives in the companies concerned are entitled to be consulted by the Commission during the latter's assessment of the concentration, if they apply to be so consulted.
Several pending legislative proposals are also of relevance to this issue. Most specifically, the draft 13th company law Directive, concerning takeover bids, includes provisions on employee information rights, among other matters (EU9911211F). The common position text of the Directive, adopted by Council of Ministers in June 2000, provides that as soon as a takeover bid is made public, the board of the target company must inform employee representatives or, where there are no such representatives, the employees directly. The target company's board must also communicate the bidder's offer document to the employee representatives or, in their absence, to the employees themselves. This offer document must state "the offeror's intentions with regard to the future business and undertakings of the target company, its employees and its management, including any material change in the conditions of employment". The target company's board must draw up and make public a document setting out its opinion on the bid, together with the reasons on which it is based, including its views on the effects of the proposed takeover on all the interests of the company, including employment. The draft Directive was given a second reading in the European Parliament in December 2000, with the Parliament proposing a number of amendments, including strengthened information rights for employees and their representatives. The proposal is likely to go to the Council-Parliament conciliation committee in early 2001 in the hope of producing an agreed text.
The proposed Directive on the information and consultation of workers at national level, issued by the Commission in November 1998 (EU9812135F) would require all undertakings with at least 50 employees to inform and consult employee representatives about a range of business, employment and work organisation issues. This information and consultation requirement would include decisions likely to lead to substantial changes in work organisation or in contractual relations, including transfers of undertakings. The Council of Ministers is still attempting to reach agreement on the draft Directive (EU0012285F).
EU-level concern about the impact of industrial restructuring prompted the Commission to establish a high-level group on the economic and social implications of industrial change (the "Gyllenhammar group") in 1998 (EU9805106N). The final report of this group, Managing change, issued in November 1998, contains a range of recommendations to the EU institutions, national governments and social partners. These included: setting up a European observatory on industrial change; promoting social dialogue on industrial change and its effects (including the information and consultation of employee representatives); encouraging large companies to produce annual "managing change reports" on their employment policies; and ensuring that closures and collective redundancies are accompanied by joint efforts by companies, employee representatives and public authorities to agree social plans, modernisation programmes and "mobilisation strategies".
The European Parliament has recently called for a strengthening of the rights of workers and their representatives in corporate restructuring, including reviews of the collective redundancies and EWCs Directives and a requirement that mergers or similar operations may be approved only if the companies involved respect European social legislation, mainly on worker information and consultation rights (EU0003233N). The European Trade Union Confederation (ETUC) is also calling for increased workers' rights in restructuring, notably through revision of the EWCs Directive (EU0001221N), and also through a reform of the concentration control procedures, making providing for greater information and consultation of employee representatives and allowing employment considerations to be taken into account in the Commission's decision (rather than just competition considerations).
With M&As and their economic and social impact such a pressing issue across Europe, this comparative study - based on the contributions of the EIRO national centres in the 15 EU Member States, plus Norway- seeks to:
- set out the main points of the regulatory framework as it applies to workers' representatives' information and consultation rights on M&As and on collective redundancies which may arise, and their rights to expert assistance and to oppose or challenge M&As, as well as provisions on the transfer of employment contracts and collective agreements;
- examine the role of public authorities, including their ability to oppose or prevent M&As and their role in collective redundancy procedures;
- outline current proposals for legislative change in this area;
- look at the evidence on the impact on jobs and collective bargaining of M&As, dealing with redundancies, negotiations to alleviate the impact on jobs, cases of workers' mobilisation in opposition to M&As and their effects, and cases where appeals for support have been made to public opinion or political circles;
- explore some of the issues raised by cross-border M&As, covering cross-border trade union cooperation and the role of, and consequences for, European Works Councils; and
- highlight the social partners' views on the regulation of M&As and their proposals for change to national or EU-level rules.
The regulatory framework
Below, we examine briefly the regulatory framework governing the rights of employees and their representatives in M&As and in any subsequent collective redundancies. Much of this framework is based on the national legislation implementing the abovementioned EU Directives on transfers of undertakings (which applies in many, though not all cases of M&A) and collective redundancies, while in a number of countries there are additional specific provisions on M&As in employee participation legislation (as, for example, in Austria, France, Germany, the Netherlands, Spain and Sweden). Specific, separate legislation on workers' rights in M&As is very rare, with a forthcoming German law one of the few examples. The Dutch Merger Code also contains specific provisions in this area.
Information and consultation rights on M&As
In all countries examined, employers are required to inform employee representatives in the event of a merger or acquisition - though Finland is alone in limiting this requirement to cases where the M&A will have an impact on the workforce. This requirement often arises from the transposition of the EU Directive on transfers of undertakings, and the legislation of the various countries is, it appears, gradually being harmonised in this area. According to the Directive, the management of both companies involved (the transferor and transferee) is responsible for providing information. In Denmark, Germany and the UK, in acquisitions it is the company being acquired that is mainly responsible for providing information.
Information is made available to different types of workers' representatives depending on the particular country, with the transfers of undertakings Directive leaving it up to individual states to define "representatives of the employees". On this issue, countries fall into three categories:
- information is provided to elected employee representatives - generally works council-type bodies - in Austria, Denmark, France, Germany and Portugal;
- trade union representatives receive the information in Belgium, Ireland, Italy, Sweden and the UK (where employee representatives are informed if there is no recognised union); and
- both elected employee representatives and union representatives are informed in Finland, Greece, Luxembourg, the Netherlands, Norway and Spain.
Many countries have alternative provisions for cases where companies have no workers' representatives, as provided for in the Directive, mostly requiring the information to be provided directly to the workers themselves. In Sweden, national and sector-level trade unions are also informed.
As noted above, the transfer of undertakings Directive sets out the issues on which information must be provided. These include: the date or proposed date of the transfer; the reasons for the transfer; the legal, economic and social implications of the transfer for the employees; and any measures envisaged in relation to the employees. The transferor must give this information to the representatives of its employees "in good time" before the transfer is carried out, while the transferee must give such information to the representatives of its employees "in good time", and in any event before the employees are directly affected by the transfer as regards their conditions of work and employment. Most member states have integrated these requirements into their domestic legislation, and some have improved on them.
As well as these provisions based explicitly on the transfers of undertakings Directive, works councils or similar bodies have the right to be informed in the event of major changes in the company, including M&As, in countries such as Austria, France, Germany, Luxembourg, the Netherlands, Spain and Sweden. In Germany, forthcoming legislation on takeovers provides specific information rights for employees and their representatives, such as an obligation on the target company to inform employee representatives or employees about the takeover bid, and about the contents of the bidding company's accompanying documentation (which must set out the planned consequences for employees, employee representation, labour relations and working conditions). The new law's provisions are similar to those of the draft EU Directive on takeovers (see above).
The transfer of undertakings Directive provides that where the transferor or transferee envisages measures in relation to its employees, it must consult the representatives of the employees "in good time" on such measures with a view to reaching an agreement. With the exception of Denmark and Portugal, all EU countries have complied with this provision.
Information and consultation rights in M&As generally derive from legislation. However, in a few cases collective bargaining plays a role. In Norway, the Basic Agreement between the NHO employers' confederation and LO trade union confederation regulates many aspects of information and consultation in such circumstances, while in Sweden, collective agreements may, and do, provide for variations from the legal provisions (while respecting minimum provisions). In Italy, some collective agreements - as in banking or insurance - provide additional information and consultation rights for union representatives in the event of restructuring, including M&As.
Table 1 below sets out the timetable and procedure for information and consultation on M&As, where this differs from the basic provisions of the transfers of undertakings Directive (ie information from the transferor in good time before the transfer occurs and from the transferee in good time and before any employees are affected, plus consultation by the transferor or the transferee in good time on any measures affecting employees with a view to reaching an agreement).
|Austria||In the event of major changes in a company, including mergers, takeovers and changes of ownership, the Works Constitution Act provides that management should inform works councils as early as possible, preferably in the planning phase, and at the latest at a time which makes consultation with works councils possible. The information must cover matters such as the reasons for the restructuring, and the numbers, qualifications and employment duration of the employees affected. In companies with more than 20 employees, compulsory social plans must be established in the event of a basic deterioration of labour standards. The works council may present proposals to prevent or mitigate negative consequences for employees due to the measures specified.|
|Finland||Under the Act on cooperation in undertakings, before employers take a decision on any matter effecting the terms and conditions of workers, they must negotiate with employees concerned or their representatives over the reasons for the action envisaged, its effects and possible alternatives. Following a business transfer, split or merger, it must be determined through an employer-employee cooperation procedure whether this change has effects falling within this obligation to negotiate.|
|France||The Labour Code requires employers to inform and consult elected employee representative bodies on mergers, transfers or major change to manufacturing patterns as well as acquisitions or transfers of subsidiaries. Where a company is planning a merger or acquisition, it must inform the works council of the rationale behind the proposed change and, where these changes have an impact on employees, to consult on the proposed employee-related measures to be implemented. Consultations must take place prior to any definitive decision by the board. The works council may give an opinion but this is not binding. If a company is the object of an unsolicited merger or acquisition bid, the sole requirement is that the employer inform the works council as soon as it becomes aware of the bid. The works council of the target company may ask the bidding party to explain its proposal. If the bidder does not accede to this request and the takeover bid is successful, it may face charges of obstructing the work of the works council. If the takeover bid fails, the bidding company does not face penalties. In the event of M&As, companies listed on the stock market are required to consult their works councils, which have an "appropriate information review period" available to them to draft a reasoned report. Failure to consult the works council may result in obstruction charges.|
|Germany||The Works Constitution Act provides that in firms with more than 20 employees, the employer must inform the works council "in full and good time of any proposed alteration which may entail substantial prejudice to the staff (...) and consult the works council on the proposed alterations". This applies in circumstances including reductions of operations, closures, transfers, amalgamations and important changes in the organisation, purpose or plant of the establishment. Furthermore, companies with more than 100 employees must establish an "economic committee" composed of employees representatives (usually works council members), which has the right to full information in good time from the employer on the financial affairs of the establishment and its implications for personnel planing, including transfers, amalgamations, changes in establishments' organisation or objectives and "any other circumstances and projects that may materially affect the interests of the employees of the company". Forthcoming takeovers legislation will introduce new information and consultation rights for works councils (see main text).|
|Italy||The information required by the legislation transposing the EU Directive on transfers of undertakings must be provided in writing and at least 25 days before the implementation of the takeover. Within seven days of receipt of the information, either the plant-level union structures or the sectoral unions may demand in writing the start of joint consultations. Both transferor and transferee must conform with this request and begin such a consultation procedure within seven days. The consultation process is regarded as having been concluded after 10 days, even if no agreement may be reached. Some sectoral collective agreements provide for additional information rights in the event of restructuring, including M&As.|
|Luxembourg||Joint committees (normally established in companies with 150 or more employees) must be informed and consulted on all economic and financial decisions that could have a decisive impact on the structure of the enterprise or employment levels. The information and the consultation process must focus on the repercussions of planned measures for the volume and structure of the workforce, and the employment and working conditions of the company's employees. They must also cover social measures, particularly those relating to vocational training and retraining. The information must normally be provided, and the consultation take place, prior to the planned decision. However, this does not apply when this might impair the management of all or part of the company, or undermine the completion of a planned operation. In such circumstances, the employer must provide the committee with all the necessary information and explanations within three days.|
|Netherlands||Under the works councils legislation and Merger Code, the companies involved in M&As must inform their works councils and the unions concerned (NL0004188F). Management must give the works council sufficient information, justify its decision and show that it has taken the interests of the employees into account. Unions must be consulted, but there is no obligation to reach an agreement, unless the relevant collective agreement states otherwise. Information and consultation must take place in due time, before the final decision has been taken. Works councils can go to court to seek to have an M&A prevented.|
|Norway||As well as referring to the information and consultation provisions of the Act on Worker Protection and Working Environment, the Companies Act stipulates that employee representatives have access to documents concerning M&As, and may express their views, which are to be included in the working papers used during the M&A process. The Basic Agreement between LO and NHO stresses the obligation on management to provide instant information, and after information has been made available the parties will usually enter into discussions on the consequences of the M&A for the employees concerned. The Basic Agreement imposes a duty on management to provide for a meeting between employee representatives and new owners, to discuss matters such as the transfer and continuation of existing collective agreements. The Basic Agreement also includes special provisions concerning limited companies, obliging management to inform employee representatives of a change of ownership as soon as possible during the planning process. This general obligation also applies to more limited M&As in which there is a transfer of at least 10% of the share capital/votes in a company, or if an owner acquires more than one-third of the share capital/shares, representing more than one-third of the votes. The management is to be instrumental in getting the new owners to inform the employees as soon as possible about their plans for the company.|
|Spain||The Workers' Statute gives workers' representatives in limited companies the right to be informed of M&As in the same way as the shareholders. The legislation on limited companies states that the shareholders must be informed in writing at least one month before the holding of the general shareholders' meeting that is to approve the merger or takeover; the same therefore applies to workers' representatives. Furthermore, when M&As involve "any incidence that affects the volume of employment", the workers' representatives are entitled to issue a report on such processes. This written report must be issued prior to the decision being taken and the workers' representatives must have at least 15 days to draw it up.|
|Sweden||The Act on Co-Determination at the Workplace gives trade union representatives the right to be informed and consulted in the event of "significant changes" within a company, including M&As. In such cases, the employer must inform union representatives and start negotiations with them. Collective agreements may provide for deviations from the provisions of the Act, but may not result in provisions which are less advantageous to employees than those of the relevant EU Directives. Agreements provide generally that negotiations in such circumstances are to be carried out quickly, and that a timetable may be negotiated on every individual occasion between the employer and the local trade union.|
|UK||The information and consultation required by the legislation transposing the EU Directive on transfers of undertakings must take place" long enough before a relevant transfer to enable the employer of any affected employees to consult all appropriate representatives".|
Information and consultation rights on collective redundancies
M&As may in some cases result in collective redundancies among the employees of the companies concerned (see below under "Impact on jobs and collective bargaining"). While the transfers of undertakings Directive provides that a transfer shall not in itself constitute grounds for dismissal by the transferor or the transferee, it stipulates that this "shall not stand in the way of" dismissals for economic, technical or organisational reasons entailing changes in the workforce. As noted above, under the terms of the EU collective redundancies Directive, when contemplating collective redundancies employers must begin consultations on specific issues (related to avoiding, reducing or mitigating the redundancies) with workers' representatives in good time with a view to reaching an agreement. This consultation is based on the provision (also in good time) of specified relevant information relating to the proposed redundancies (reasons, numbers, timing etc). All the countries covered here have implemented the Directive's provisions, with national variations relating to issues such as the identity of the workers' representatives informed and consulted (see previous section) or the definition of collective redundancies. Furthermore, as outlined in the previous section, in countries such as Austria, Germany, Luxembourg, the Netherlands and Spain, workers' representatives have information and consultation rights related to planned changes in employment levels.
Information and consultation rights on collective redundancies are particularly well developed in Belgium. Following the closure of the Renault factory at Vilvoorde in 1997 (EU9703108F), a new law "laying down provisions in favour of employment" (the "Renault law") was adopted in February 1998, which seeks (among other aims) to define clearly the various stages necessary to inform workers' representatives about planned collective redundancies, and also to lay down sanctions in the event of non-compliance. Employers planning to carry out collective redundancies are required to follow a four-step information and consultation procedure, which includes a right for employee representatives to raise questions and to formulate arguments or make counter-proposals, to which the employer must respond.
The right to expert assistance
In some countries, such as Austria, France, Germany, Luxembourg, the Netherlands, Norway and Sweden, legislation (or the Basic Agreement in the case of Norway) provides explicitly that employee representatives may obtain expert assistance in information, consultation and negotiation procedures relating to M&As. In Finland, there is a dual system specifically permitting expert assistance in the case of M&As involving multinational companies but not those involving only domestic companies. In other countries, no legislation exists on this issue exists, though in Spain, expert assistance may be provided for by collective agreements.
Right of opposition
It is rare in the countries considered here for employees and their representatives to be able to challenge or oppose a planned M&A in any way. An exception is the Netherlands, where the managements of companies involved in an M&A have to ask their respective works councils for their opinion. When the opinion of the works council is negative, management has to postpone the implementation of its decision for a period of one month. During that period, the works council can go to court to fight the merger decision.
There are several countries where workers' representatives may give their view on M&As, though without this necessarily having any effect. In Norway, there is a legal obligation on employers to inform workers' representatives about the purchase of shares in companies of a certain size or nature. In such cases, employees are entitled to express their views on the purchase while it is being considered by the Ministry of Trade and Industry. If the Ministry believes that the purchase will have negative effects on the enterprise, with regard to the particular sector or society at large (including effects on employment), the purchase may be subjected to further scrutiny. In these cases employees (as well as other parties) may express their views on the purchase. In Ireland, under the Mergers and Takeovers Acts, 1978 to 1996, workers or workforce representatives in a company which is planning to undergo a merger or takeover can (along with any member of the public) write to the Minister for Enterprise, Trade and Employment to challenge the proposed merger or takeover. However, only the Minister has the authority to prohibit or postpone a merger or takeover. The forthcoming new German takeovers legislation entitles works councils to give their opinion on a takeover bid, but there is no obligation for this opinion to be followed.
Where an M&A involves a transfer of undertakings, as we have seen above, workers' representatives must be informed and consulted, and they may of course express opposition during this process, though without having any right to prevent or delay the process (except insofar as the information and consultation procedure must be completed). Workers and their representatives may also presumably, under the terms of the transfers of undertakings Directive, challenge legally job losses arising out of transfers, where these are not for "economic, technical or organisational reasons". Similarly, where M&As involve collective redundancies or employment reductions, information, consultation and sometimes negotiations must occur. Workers' representatives may have the right to make counter-proposals (as in Belgium), issue reports (as in Spain) or give opinions (as in France), but these are not binding on the employer and representatives have no power to prevent or delay the job losses (except insofar as the information, consultation and/or negotiation procedure must be completed).
Transfer of employment contracts and collective agreements
Where an M&A involves a transfer of undertakings, under the terms of the EU Directive, the rights and obligations of the transferor organisation arising from a contract of employment or employment relationship are transferred to the transferee. Furthermore, following the transfer, the transferee must observe the terms and conditions in any applicable collective agreement until the agreement expires or is replaced. All the countries considered here have implemented these provisions in their national regulations.
The role of public authorities
The role of public authorities in M&As is considered below (examining only the role of local and national public authorities, and not EU-level public authorities - see above under "Control of concentrations").
Opposition to mergers and takeovers
The ability of public authorities to oppose or prevent M&As, generally on competition or public interest grounds, varies greatly from country to country. Luxembourg appears to be the only country with no specific legislation in this area. Greece does not have a legal framework for the private sector, though in the country's current privatisation drive, public authorities are paying special attention to the takeover of state-owned companies by private concerns. Denmark has recently passed legislation giving the public authorities the power to oversee M&As. Austria, Belgium, Finland, France, Germany, Ireland, Italy, the Netherlands, Norway, Portugal, Spain, Sweden and the UK all have specific legislation or regulatory bodies, or both.
Although the public authorities in these countries have the right to prevent M&As or demand changes in them, it appears that this right is rarely used in countries such as Austria, the Netherlands and Sweden. The right is limited in Denmark, Spain and the UK, and depends on the size or turnover of the companies involved in countries such as Germany, Denmark, Ireland and Sweden.
An example is Germany, where M&As of a certain size are regularly examined by the Federal Cartel Office (Bundeskartellamt). This applies if in the last business year preceding the concentration: the combined aggregate worldwide turnover of all participating undertakings was more than DEM 1,000 million; and the domestic turnover of at least on participating undertaking was more than DEM 50 million. The Federal Cartel Office may prohibit a concentration which is expected to create or strengthen a dominant position unless participating undertakings prove that the concentration will also lead to improvements in the conditions for competition, and that these improvements will outweigh the disadvantages of dominance. The government also appoints a council of experts, the Monopolies Commission (Monopolkommission), which regularly monitors M&As and publishes a comprehensive reports on the concentration process in Germany every two years.
Recent cases of public authorities intervening to prevent M&As or to require conditions are reported from France, Ireland, Italy, the Netherlands, Spain and the UK. For example:
- in 2000, the French Minister for the Economy blocked the US-owned giant Coca Cola from buying out Orangina, owned by Pernod Ricard, on the grounds that it would have an adverse effect on free competition, and required the sell-off of a number of outlets before authorising the merger of the Carrefour and Promodès retail chains, in order to guarantee free consumer choice;
- in 1998, the Irish government (following the advice of the Competition Authority) prohibit the takeover of the Northern Ireland saw-milling company, Balcas, by the state-owned forestry company, Coillte, on the grounds that it would "restrict competition and thus operate against the common good";
- in 2000, the Italian Guarantee Authority for competition imposed specific actions in order to avoid potential anti-competition effects when authorising the acquisition of Seat Pagine Gialle by Telecom Italia;
- the Dutch competition authorities recently demanded certain conditions in order to allow the merger of the Van Ommeren and Pakhoed shipping and storage companies. Initially, the companies cancelled the merger but they eventually decided to comply with the conditions and merge; and
- in 1999 the Spanish government made the takeover of Pryca by the Continent retail group conditional on the sale of a number of outlets, in order to guarantee free competition.
Information to public authorities on planned redundancies
A further potential role for the public authorities in M&As might arise in the event of collective redundancies planned as part of the M&A process. The EU collective redundancies Directive requires employers to notify the competent public authorities in writing of any projected collective redundancies, and such redundancies may not take effect earlier than 30 days after this notification. These provisions are reflected in the regulations of all the countries examined here - table 2 below indicates the identity of the labour authorities which must be notified - with national variations with regard to issues such as the contents of the information notified. However, in most cases, these provisions on informing the public authorities apply only to a certain size of company (commonly those employing over 20 workers) and scale of redundancy, reflecting national provisions defining collective redundancies - see table 2. In addition to recording the information provided by employers, the public authorities' role is most often that of organising mediation or discussion of alternatives, or extending the redundancy notice period. Only Greece and the Netherlands still require public authority approval for all redundancies, while such approval is required in Spain in the absence of an agreement between employers and workers' representatives.
|Country||Public authority notified||Redundancy numbers threshold for application of requirement||Public authority authorisation required?|
|Austria||Regional Employment Service (Arbeitsmarktservice, AMS)||At least five employees in companies with 20-100 workers; at least 5% of workforce in companies with 100-600 workers; at least 30 employees in companies with 600 workers; or at least five employees aged over 50.||No|
|Belgium||Director of Subregional Employment Department.||At least 10 employees in companies with 20-100 workers; at least 10% of workforce in companies with 100-300 workers; and at least 30 employees in companies with 300 workers.||No, but may seek to intervene - eg through suggesting conciliation or analysing alternatives.|
|Denmark||Regional Labour Market Councils (Regionale Arbejdsmarkedsråd, RAR) and Public Employment Service (Arbejdsformidlingen, AF).||At least 10 employees in companies with 20-100 workers; at least 10% of workforce in companies with 100-300 workers; and at least 30 employees in companies with 300 workers.||No - but will try to find alternative solutions with employer.|
|Finland||Local employment office||No threshold.||No.|
|France||Local (département-level) Labour Ministry Administration Office||No threshold.||No.|
|Germany||Regional Employment Office||Over five employees in companies with 20-60 workers; over 10% of workforce or over 25 employees in companies with 60-500 workers; and over 30 employees in companies with 500 workers.||No, but may delay redundancies by up to two months.|
|Greece||Ministry of Labour and Social Security||Four or more employees in companies with 20-200 workers.||Yes|
|Ireland||Minister for Employment.||Over 30 consecutive days: at least five employees in establishments with 20-50 workers; at least 10 employees in establishments with 50-100 workers; and at least 30 employees in establishments with 300 workers.||No, but Minister may require employer to consult authorities in order to seek solutions to problems caused by the redundancies, or attempt to reduce number of planned redundancies.|
|Italy||Provincial Labour Office.||At least five employees (over 120 days and in same province) in companies with over 15 workers. Limits do not apply if collective redundancy follows use of extraordinary Wages Guarantee Fund (open mainly to manufacturing firms and commercial companies with 200 workers).||No, but public authorities often play mediation and persuasion role with a view to helping parties reach agreement|
|Luxembourg||Employment Administration and Labour and Mines Inspectorate, plus National Conciliation Office if failure to agree social plan.||Over six employees within 30 days; and over 14 employees within 90 days.||No, but can extend notice period to 90 days, or 120 days for companies which have benefited from some state funding.|
|Netherlands||District Employment Services Authority (Regionaal Bestuur voor de Arbeidsvoorziening, RBA).||20 or more employees within a three-month period.||Yes. All redundancies are submitted for approval by RBA and may be refused.|
|Norway||Employment Service||At least 10 employees within 30 days.||No, but may delay redundancies by additional 30 days to facilitate agreement in company concerned.|
|Portugal||Ministry of Labour.||At least two employees in companies with up to 50 workers; and at least five employees in companies with 50 workers.||No (provisions repealed in 1989).|
|Spain||Labour authorities at local, regional or national levels.||Over 90 days: at least 10 employees in companies with 1-99 workers; at least 10% of workforce in companies with 100-299 workers; and at least 30 employees in companies with 300 workers. Also redundancies that affect 100% of workforce in companies with six or more workers, if these result from termination of company's activities.||Yes. Where redundancies are not agreed by workers' representatives, the prior authorisation of the labour authorities is required.|
|Sweden||Local labour market authorities (länsarbetsnämnderna).||Notification must occur: six months before redundancies occur if more than 100 workers are concerned; four months before if 26-99 workers concerned; and two months before if 25 or fewer workers concerned.||No.|
|United Kingdom||Department of Trade and Industry.||At least 20 employees within a 90-day period.||No.|
Proposals for legislative change
Some Member States are in the process of developing their regulatory framework governing M&As, or are planning to do so (sometimes reflecting the content of the proposed EU Directive on takeover bids). The law has recently been changed in Spain (Royal Decree-Law 6/1999), leading to a fundamental change in the public control of certain M&As on competition grounds, aimed at adapting national regulations to EU provisions. This involves the advance notification of M&As of a certain size to the Defence of Competition Service, and the examination and approval or refusal of M&As by the Minister of Economy and Inland Revenue and the Defence of Competition Court. Denmark has recently created a committee including representatives of employers' organisations and trade unions to look at overhauling M&A legislation. In Ireland, the Department of Enterprise, Trade and Employment plans to amend current regulations relating to M&As. The UK government has recently issued a consultation paper containing plans to change the system of regulating mergers, although these do not relate directly to industrial relations considerations.
In some cases, planned or potential legislative change in this area has explicit implications for the role of employee representatives:
- in Germany, following the controversial takeover of Mannesmann by the UK-based Vodafone in early 2000 (DE9911220F), the federal government tabled a bill setting up a new statutory framework for takeovers. Among other matters, this provides for new information rights for employees and their representatives (see above under "Information and consultation rights on M&As"). This legislation is due to come into force in early 2001;
- in France, a bill on "new economic regulations" - due to be implemented some time in 2001 - is currently under debate in parliament. The proposed legislation strengthens the role of works councils in terms of the right to information in M&As; and
- in the Netherlands, a new Merger Code (see above under "Information and consultation rights on M&As") is due to come into force in the near future, extending the Code to the non-profit sector (and probably also to the government sector) and making it easier for unions to file a complaint if management neglects its duties to inform and consult. Forthcoming changes in the rules on takeover bids may address the current system whereby the management of the target company and the unions have to be consulted prior to takeover bids - a situation which is unusual in the EU and is contrary to the proposed EU takeovers Directive. Furthermore, a bill on defensive measures against hostile takeovers may reduce the relatively high level of protection for Dutch companies against hostile takeovers (in line with the proposed EU Directive) and would slightly weaken the position of unions and works councils in the target company (NL9801154F).
Impact on jobs and collective bargaining
Redundancies following M&As
In Europe, M&As are now very common (see above), and in recent years the use of hostile takeover bids has increased in cross-border, intra-European or domestic takeovers. However, the announcement of large-scale redundancies following M&As is not common in Europe, except in the UK, where this practice is widespread (recent examples including the takeover by the Royal Bank of Scotland of NatWest[UK0003160F] and the mergers of BP and Amoco and of SmithKline Beecham and Glaxo Wellcome). While these transactions have a significant impact on jobs - not least because of duplication (ie the existence of identical jobs in each of the formerly separate companies) - this very often takes place over time in the form of collectively agreed early retirement, voluntary redundancies etc (see next section). As for redundancies, where they occur, they do not, as a rule, immediately and directly follow mergers or takeovers.
However, in the financial sector (banking and insurance), which has recently gone through several periods of restructuring and an intense M&A-led consolidation process - as in Austria, Belgium, France, Germany, Greece and Italy - post-M&A redundancies have occurred even in those countries where this practice is uncommon. Cases in point include Greece, Portugal and Germany (where major job losses were planned in the ultimately failed merger of Deutsche Bank andDresdner Bank).
Negotiations to alleviate jobs impact of M&As
In many EU countries, "social plans" are used as a way of avoiding "straight" redundancies following M&As, as in other situations . They promote redeployment and negotiated termination of employment through early retirement, voluntary redundancy etc. There are many cases where negotiation has been used to alleviate the impact of planned job losses following M&As, though the negotiation of such plans seems less common in the UK. The tangible outcome of redundancy negotiation tends to be:
- a reduction in the planned number of redundancies, the withdrawal of announced redundancies or the provision of employment guarantees, as for example in Belgium, Germany, Greece, Ireland and Italy. Cases include the takeover of Greek Ionian Bank by Credit Bank and Telecom Italia's takeover by Olivetti/Tecnost;
- the guaranteed safeguarding of wage and working conditions by the new employer, as for example in Belgium and Ireland. Cases include the merger of the Belgian Générale de Banque/Generale Bankmaatschappij and ASLK/CGER finance companies
- a commitment to avoid compulsory redundancies, as for example in Germany, Ireland, Spain and the UK. Cases include the takeover of the German steel producer Thyssen by its competitor Krupp-Hoesch, the merger of the Spanish banks Banco Santander and Banco Central Hispano and the merger of the UK insurance companies Royal Insurance and Sun Alliance in terms of its impact in Ireland; and
- early retirement, voluntary redundancy or redeployment provisions, as for example in France, Ireland, Italy, the Netherlands, Norway, Portugal, Spain and the UK. Cases include the acquisition of the Italian insurance company INA by Generali and the merger of the Dutch shipping and storage firms Pakhoed and Van Ommeren.
M&As frequently lead to trade union mobilisation in opposition to the transaction or to its perceived effect on employment or employment conditions, though in a country such as the UK where unions tend to see M&As as inevitable, the focus is more on seeking to minimise the effects on jobs. While the usual response to M&As is bargaining and dialogue, more disruptive types of action, such as demonstrations and strikes, have taken place in countries including Finland, France, Germany, Greece, Italy, Norway, Portugal, Sweden and the UK. Industrial action has, in some cases, completely blocked M&As, delayed them, changed their terms or improved their employment aspects. Recent examples include the following:
- in France in 1999, following the BNP bank's take-over bid for Sociétié Générale and Paribas (FR9903169N), Société Générale employees, who were opposed to the plan, mounted strike action led by four of the five unions (CFTC, CGT, CGT-FO, SNB-CFE-CGC) represented at the company (CFDT abstained). This industrial action by employees was a factor in the failure of the BNP takeover bid for Société Générale despite the fact that the takeover at Paribas was successful (FR9909107N). Indeed, pressure tactics by workers, who control 8.6% of the bank's capital, prevented BNP from gaining control of more than a third of voting rights;
- in 1999-2000, German unions opposed the takeover of Mannesmann by Vodafone through means including demonstrations and token strikes (DE9911220F). In the unions' view, this pressure brought concessions by Vodafone on employment guarantees and the rights of workers, works councils and trade unions. When takeover seemed likely to succeed, attention shifted to obtaining a satisfactory agreement on employees' rights following the takeover (DE0003248N); and
- in 2000, BMW, the German-based motor manufacturer, put up for sale its UK-based Rover subsidiary (UK0004164F). Initially, the most likely buyer appeared to be the Alchemy finance group. UK unions were opposed to Alchemy as a buyer, arguing that the company would seek to "asset strip" Rover. Accordingly, they organised demonstrations outside the Longbridge plant in Birmingham and through the centre of London, seeking to exert political pressure on the government to intervene and support a rival consortium, Phoenix. Eventually, the Longbridge plant was indeed sold to Phoenix though it is not clear how much of an impact the unions' campaign had (UK0005174F).
Appeals to public opinion
Appeals for support to public opinion from employees and their representatives in opposition to M&As are uncommon, often because they are unnecessary. However, this approach has been used to fight increasingly common hostile takeover bids in France, Germany and the UK (as in the cases cited in the previous section). In light of the fact that the takeover bid phenomenon has spread throughout continental Europe, appeals to public opinion may become increasingly common in the future. Although currently rare, they generally take the form of demonstrations, press advertisements or symbolic shutdowns of retail outlets. In the UK and Finland they have included proposals for appeals to consumers to boycott the products of the bidder company.
Appeals to politicians
Appeals by workers' representatives to political circles for support in opposing M&As is the exception to the rule in Europe, either because it is unnecessary, or because mediation involving public authorities such as the Ministry for Labour or Finance, and occasionally ad hoc bodies, is already widespread anyway and generally results in agreements. However, such appeals do occur in some cases. For example, there was political support from regional and national German politicians for the workforce's opposition to Vodafone's hostile takeover of Mannesmann, which is thought to have led Vodafone to take a more "employee-friendly" approach in the takeover. Other cases concern M&As within the framework of privatisations, where for example in Greece, Ireland and the Netherlands, appeals may be made to the appropriate minister.
Cross-border M&As and the role of European Works Councils
As examined above, cross-border M&As represent an ever-increasing proportion of total M&As. This phenomenon causes specific problems for industrial relations.
First, there may be differences in culture between the companies involved in M&As, in terms of both management approach and relations with trade unions. As far as management is concerned, reference is often made to the difference between "anglo-saxon-style" management, oriented towards short-term profit, and "continental" or "German-style" management, focusing on the long term. Trade unions also have to face similar variations in approach, with more "cooperation-based" relations with management in continental European companies and a more conflict-oriented style in anglo-saxon companies. There is an even more marked contrast in terms of trade union attitudes to economic management issues. In countries such as Germany, trade unions and elected employee representatives are integrated into a system of co-determination which includes involvement in identifying corporate strategic objectives. As a result their behaviour tends to take economic factors into account. In other countries - and not just English-speaking ones - unions often adopt an attitude of indifference, or outright hostility, to corporate economic management rationale. Ironically, the growing influence of the short-term approach model through M&As appears to result in a degree of convergence in industrial relations. Thus, German trade unions have developed a more critical view of globalisation, while in the UK local management sometimes adopts a more open approach to social dialogue when taken over by a company based in continental Europe.
Cross-border union cooperation
A further impact of cross-border M&As on industrial relations stems from the fact that this type of transaction may enable management to create competition between various production sites. This is nothing new in itself, but it does create problems for trade union cooperation at local, national and international level. Union cooperation within multinational groups newly created by M&As still does not appear to be very common, with reported examples including: French and German unions in the merger of Hoechst and Rhô ne-Poulenc to create Aventis; French, German and Spanish unions in the merger of Aérospatiale, Dasa and Casa to create the European Aeronautic Defence and Space Company (EADS); and Dutch and UK unions in light of the planned (and since abandoned) merger of BA and KLM. Where cooperation occurs, the trade union European industry federations often assist in bringing trade unionists from the various newly-merged companies together. Naturally, setting up inter-union cooperation is more problematic when the companies involved in the M&A do not operate in the same sector and when, as a result, various national and European trade unions are involved.
The greatest success story to date, in terms of trade union cooperation, appears to be between the French FCE-CFDT and the German IG BCE chemical workers' unions at Hoechst and Rhône-Poulenc, which merged in 1999 to form Aventis, headquartered in Strasbourg (FR9812146F). The two unions issued a joint statement on the merger and signed a cooperation agreement (DE9905201N). Their ongoing cooperation takes place at several levels, involving the national union leaderships, local trade union and elected representatives, and the European Works Council of the merged company (see below). Joint negotiations with the management of Aventis have already resulted in an agreement on access to information and profit-sharing, issues highlighted by the unions in their joint strategic agenda. No across-the-board agreement has yet reached on the unions' second main priority - avoiding redundancies stemming from the new company's restructuring - but negotiations on this issue continue at several levels.
In several reported cases, a lack of union cooperation around an M&A is due to the fact that there is only a very minor or non-existent union presence in one of the companies involved. A case in point is the Vodafone takeover of Mannesmann, where the former does not recognise any trade union representing its staff in the UK (DE0003248N).
Role of European Works Councils
The information and consultation of employee representatives in M&As was one of the objectives of the European Works Councils (EWC s) Directive (as reflected in the Directive's subsidiary requirements - see above under "European Works Councils"). Furthermore, most EWC agreements provide for information and consultation on transfers of production, mergers, closures and cutbacks, while the vast majority provide for some form of extraordinary meeting in exceptional circumstances (according to research conducted for the European Foundation for the Improvement of Living and Working Conditions). Where M&As involve one or more multinational companies (including from the same country), one might thus expect EWCs to become involved. However, there are very few reported cases where EWCs have played an active role in the M&A process. Each individual EWC has tended to play a modest and formal role. There are no reports of disputes over the EWC information and consultation process, despite the fact that information has sometimes been disclosed quite late in the M&A proceedings. For example, a Belgian study of four multinationals involved in M&As found that in two cases extraordinary EWC meetings were called by workers' representatives following mergers but only after the event, while in one case management informed the EWC secretary about a merger that was to be publicly announced 12 hours later. In one company, the EWC received an assurance that there would be no redundancies during a fixed period as a result of a merger .
It appears that EWCs have not played a major role in cooperation between employee representatives in companies involved in cross-border M&As. It seems difficult to get the representatives of the various subsidiaries of the companies involved in M&As to adopt a joint position (though cases are reported, as in the Belgian study reported above). Such cooperation is less problematic in a domestic M&A situation. This is probably the reason why, in some countries, providing information to national representation bodies is seen as more important than EWC involvement (as, for example, in the Netherlands).
In a few cases, joint meetings between the members of both EWCs involved in an M&A have been arranged, sometimes with the support of a European industry federation. It is more difficult to set up multilateral cooperation between staff representatives from the various countries in which the two companies operate than bilateral union cooperation. In some cases, multilateral cooperation has proved simply impossible because one of the companies either did not have a EWC or it was disbanded during the M&A process. One case where there has been significant cooperation between the EWCs involved in a form of M&A is the alliance launched in 2000 by the motor manufacturers Fiat and GM (IT0004151F). Here, there have been joint meetings and contacts between the two EWCs, organised by the European Metalworkers' Federation. The EWCs have agreed a common strategy in order to cooperate and avoid employment reduction and the worsening of working conditions, and at the same time safeguard existing collective agreements.
EWCs following M&As
EWCs must often be adapted to the new corporate set-up resulting from M&As, with the adaptation varying according to the nature of the transaction. In takeovers, many EWC agreements lay down the criteria and procedures for extending the scope of the EWC of the acquiring company, though renegotiation may occur following the takeover. A specific problem arises where EWCs existed in both companies involved and where a genuine merger rather than a simple acquisition occurs. In this case, as a rule of thumb, a new EWC is negotiated for the new company - examples include new EWC agreements following the mergers of Hoechst and Rhône-Poulenc (where French and German unions also signed an agreement with management on information rights and co-determination, including board-level employee representation), AXA and UAP (insurance), Carrefour and Promodès (commerce) or Ciba Geigy and Sandoz (chemicals). However, this is not compulsory and the two former EWCs may continue to co-exist, as has been the case after the Ford-Volvo merger.
The EWC-creation process is cumbersome and it can be some time before a new EWC actually comes into being. Indeed, negotiation becomes very delicate where one of the former EWCs enjoyed greater powers than its counterpart (for example, problems emerged following the merger between the Dutch Sphinx and the Finnish Sanitec, as the former's EWC had more rights than the latter's). Problems may also arise where only one of the companies involved had an EWC, giving rise to management "misgivings" over creating a new EWC.
Social partner views on the regulatory framework
Generally speaking, trade unions view domestic legislation relating to M&As (including that on transfers of undertakings), in particular on information and consultation rights (especially in advance of decisions) and the safeguarding of workers' interests as insufficient, while employers' associations regularly contend that existing regulations in this area are excessive. In some countries, legislation relating to some aspects of M&As, notably on collective redundancies, is the subject of debate among the social partners - as in Spain, where the supposed employee-friendly and costly nature of redundancies rules is criticised by employers (ES0012226F).
However, the views of the social partners on M&A regulations are not always opposed. In the Netherlands, the tripartite Social and Economic Council (SER) - consisting of trade union and employers' organisation representatives and independent members - reached unanimous agreement on the new Merger Code (see above), and employers and unions have similar views on the subject of (defences against) hostile takeovers, rejecting a significant increase in the influence of shareholders. Both unions and employers are fairly critical of the recently established Competition Authority.
The social partners are reported to have said very little on the EU regulations relating to M&As, though they they have sometimes suggested that they do not really affect the domestic situation. Employers' associations have sometimes spoken out against excessive regulation, while some trade unions support changes to some aspects of existing regulations (see next section).
Proposals for reform
Changes to the legislation relating to M&As at both domestic and EU level are proposed by some social partner organisations. At both levels, the unions are more keen on change than the employers' organisations.
At national level, trade union proposals often reflect the disparity between the degree to which M&As themselves are regulated and the degree to which their social impact is regulated. In some cases, trade unions are seeking changes to the regulatory framework specifically governing M&As. For example, trade unions in Germany (where employees' representatives already enjoy wide-ranging co-determination rights) want the forthcoming new takeovers law (see above under "Information and consultation rights on M&As") to be amended so that: employee representatives of the target company would have the opportunity to hold talks with the management (and perhaps also the employee representatives) of the bidding company; and trade union representatives in the target company would have the right to conclude a collective agreement with the new owner on the employment and industrial relations aspects of the takeover.
The UK Trades Union Congress (TUC) argues for a wider interpretation of the "public interest" than is currently used in the national authorities' consideration of M&As, with the impact on employees, customers, other stakeholders and regional aspects being explicitly considered, in addition to competition. In relation to industrial relations, the TUC would like to see: a legal obligation on firms considering an M&A to engage in an "ongoing process" of consultation; and the creation of an Employee Protection Agency which would attempt to safeguard workers' rights in M&As, paying particular attention to redundancies, job transfers and pensions.
In some other countries, the reforms to national legislation proposed by unions relate to legislation in areas connected to M&As, or issues highlighted by them. In Spain, for example, with M&As creating more groups of companies, unions are demanding the right to representation at corporate group level (as already exists in several other European countries). In Denmark, unions are demanding improved provisions on the transfer of collective agreements to new owners in transfers of undertakings.
At the EU level, many national unions, in line with ETUC's position (see above under "Other concerns"), are demanding that the EWCs Directive be amended to strengthen information and consultations rights in the event of M&As. However, not all unions support this demand. Danish unions do not wish to see the rights of EWCs extended, on the grounds that they are not purely union bodies, but also include non-union representatives. Employers' organisations are of the opinion that any revision of the Directive would be premature and that existing EWCs should be allowed to gain more experience first. In addition to changes to the EWCs Directive, German unions see an urgent need for European (and indeed international) regulations on M&As which guarantee basic employees' and trade union rights.
Arguably, the issue of the impact of M&As on industrial relations does not naturally lend itself to comparative analysis. However, is is clear that there is a paradox: while there is a growing trend towards M&As in all European Union countries, which raises serious industrial relations problems, the intervention powers of the various parties and the social impact of M&As still vary greatly from one country to another.
This leads to a second paradox. While the issue of M&As often gives rise to major public debate, little scientific analysis on their consequences for industrial relations has been done. Nearly all the EIRO national centres point to a lack of scientific studies on this issue, beyond the topic of legal policy. More generally speaking, the information provided by the national centres on significant developments in this area reflects this research deficit, since the lack of comprehensive studies forces researchers to rely on piecemeal information.
There are two possible interpretations of the apparent contradiction between the intensity of public debate on M&As and the lack of information on their impact on industrial relations. First, public debate seems to focus on economic factors, such as the impact on competition, distance from decision-making or loss of national control, etc. This debate is particularly intense in those countries which have traditionally had a system of stable "corporate governance" and which are now suddenly faced with hostile takeover "raids".
A second explanation is that the statutory provisions relating to collective redundancies seem effective. This is the number one trade union concern, even though they have raised other concerns, examined above, on the growing trend towards M&As. Consequently, M&As take place as if EU and national regulations offered relatively effective protection against possible threats to the job security of those workers involved.
This final statement should be qualified, since information supplied by national centres points to major differences in the real power wielded by workers' representatives to counter mass redundancies. This issue is not dealt with directly in this comparative study but, intuitively, it seems that the ways in which workers' representatives react to M&As are closely linked to the strength of the legal powers that they may have to protect job security. In simple terms, where there is a lower intensity of public debate on the industrial relations impact of M&As, this can be linked to the existence of powers or procedures enabling workers' representatives to take decisive action in advance on company decisions in this area.
On this issue, the countries considered here fall into the same two distinct categories as on many others. First, there are those where workers' representatives have significant intervention powers - as in the Scandinavian countries, Germany, the Netherlands and Austria, which traditionally fall under the heading of northern/central Europe, though Spain is also included in this group. However, intervention procedures in this group vary from country to country. In some countries, elected employee representatives hold this power, in others trade unions have the relevant rights, while in others both do. However, this difference in procedures is not relevant to this analysis, since it also exists among the second group of countries (ie all those apart from those mentioned above) where the intervention rights of workers' representatives are less powerful and mainly based on information and consultation.
However, it should be pointed out that neither form of intervention has a systematic impact on the number of collective redundancies which occur. Major post-M&A collective redundancies have also been recorded in countries with significant intervention mechanisms for workers' representatives. Consequently, a lack of intervention on the part of workers' representatives cannot automatically be attributed to weaker information rights. Nevertheless, the case of the UK, which in the past has seen much mass redundancy, suggests that the absence of legal provisions makes union intervention more difficult and means that it is often reliant on the goodwill of employers.
A lack of statistical data makes a comparative analysis of the effects of M&As difficult. Those few studies cited from the various countries, in particular Austria, demonstrate that in many cases, M&As do not lead to collective redundancies and that workers' representatives regularly succeed in temporarily reducing the impact of M&As on jobs by negotiating measures such as voluntary redundancy, early retirement and not filling vacant posts. Therefore, industrial relations seem to be managing to remain unaffected to a certain degree by the economic restrictions caused by the M&As phenomenon.
However, this latter state of affairs is increasingly being challenged or even eroded by the scale of the economic factors at issue. What is more, not all M&As are alike. As a result, the amount of leeway enjoyed by the social partners varies according to whether, for example, an M&A involves two profitable companies, which are combining merely to expand production, or the M&A is simply a move to gain control of the brands of a company in difficulty. These two opposing situations also relate to differences in company management style - ie one focused on short-term gain or one oriented towards long-term economic strategies. However, as British observers have pointed out, the increasing trend towards M&As means, ultimately, that any large company is a potential takeover target. This trend would indirectly lead to a shift in management styles towards short-term gain. The British economy is arguably a good example of the "vicious circle" thus created and of the devastating implications for a country's workforce and industrial fabric.
While taking it as a given that M&As do not systematically have a negative impact on employment levels, it must be pointed out that increased M&A activity does lead to economic uncertainty and industrial relations instability. While this comparative study suggests that the M&A phenomenon has not yet undermined relatively solid industrial relations systems, such as those in northern/central Europe, they have nevertheless been considerably affected, especially in the case of cross-border M&As.
In the case of such cross-border M&As, national industrial relations systems are laid bare to comparison and as a result, there is a danger of "social dumping". Of course, within the EU, this danger has been offset by major harmonisation of some areas of industrial relations between the Member States. A common legislative core now exists in relation to some aspects of M&As, mainly based on the EU Directives on workers' rights in the event of transfers of undertakings and collective redundancies. However, while these Directives have undoubtedly helped to harmonise individual workers' rights, differences in the intervention rights of workers' representatives continue to exist. Undoubtedly it will not be easy to harmonise the latter in the near future, even if we assume that the Member States have the political resolve to do so. Nevertheless, it would seem desirable to implement appropriate measures to strengthen workers' representatives' scope for intervention.
There are many shortcomings in the national systems providing for workers' representatives to intervene in M&A situations. The first is the point at which the intervention may be made. Very often, representatives are able to take only very belated action, after the economic decisions have been made. This delay considerably reduces any possibility of changing these decisions to accommodate workers' interests better. Providing information to workers' representatives late in the process often stems from employers' fears that releasing information early could block a negotiated M&A. However, it is hard to see why an overhaul of the information-provision procedures could not successfully integrate confidentiality requirements, backed by penalties. This would also require stiffer penalties for employers which fail to comply with timetables for the provision of information.
Industrial relations instability resulting from M&As could also be offset by improving the provisions on the obligatory application of existing collective agreements after the change of ownership, as with the transfer of individual employment contracts. A further idea would be to implement a moratorium on redundancies for a significant period after an M&A. The major impact of such a requirement would be to reassure the employees of companies facing temporary economic difficulties. An additional measure might be for public authorities, at both national and EU level, to develop their M&A-authorisation criteria to include social considerations based on the public interest, as well as traditional economic considerations. Strengthening the intervention powers of public authorities and workers' representatives would not necessarily be contrary to employers' interests, since it would encourage employers to be more forward-looking and as a result lead to more successful M&As. It is worth remembering that any instability stemming from M&As is intensified twofold by instability resulting from failed M&As (which currently make up half of all proposed M&As). This failure rate represents considerable financial, industrial relations and human waste. (Simon Macaire and Udo Rehfeldt, IRES, with the assistance of Maurice Braud and Catherine Sauviat, IRES, and Mark Carley, SPIRE Associates)