How strategic thinking turned a challenging acquisition into a business success story

A real-world case study shows that even the most complex employment transfers can be navigated successfully with the right expertise and approach.

When a thriving Surrey marketing company acquired a smaller competitor from receivership after it had gone into liquidation, they thought they knew what they were getting into. The Transfer of Undertakings (Protection of Employment) Regulations meant taking on the entire workforce – complete with their original terms, conditions, and length of service intact.

However, there were two key aspects of the transfer that threatened to undermine the entire acquisition:

Mismatched skills: a number of the roles in the acquired company simply didn’t fit within the existing structure of the new company.

Performance issues: one senior account manager in particular, who had transferred across with substantial benefits and long service, was showing early signs that he might be a classic “Peter”. That is, he had been promoted beyond his capabilities, as per the “Peter Principle” as outlined in the 1969 book by Laurence J. Peter and Raymond Hull, suggesting that in a hierarchy, individuals are promoted based on their performance in their current role, until they reach a position where they are no longer competent.

The PSM approach: finding opportunity in complexity

While seemingly considered an impossible situation, with the TUPE transfer leaving the company with their “hands tied”, PSM took a different approach. Over the years, we've learned that employment law isn't just about compliance – it's about understanding how regulations can work for your business, not against it. PSM proposed that a restructuring of the combined workforce be considered, so as to ensure that the new structure both reflected the existing and future needs of the company, and ensured that the employees being retained were all treated equally in the analysis of their skill sets via a skills assessment. This ensured that the skills matched and reflected the existing and future needs of the company in the provision of their services. 

Economic, Technical & Organisational (ETO) provisions

Hidden within TUPE's Section 7.2 lies a crucial provision that many advisors overlook. The ETO clause allows both transferor and transferee companies to make necessary changes, provided they can demonstrate genuine business reasons and follow fair procedures.

This wasn't about finding loopholes – it was about using the law as it was intended: to protect employees while allowing businesses to remain viable.

Our strategic recommendation

A comprehensive workforce restructure that would:

• Assess all employees fairly using objective criteria

• Ensure the best skills were retained regardless of which company they originally worked for

• Create a structure fit for future growth, not just inherited from the past

The solution

PSM advised the Company to restructure the combined group of employees, by using a matrix analysis of the skill sets available across all of its general employees, with assessments being completed by two separate members of the combined management team, without any collusion between the two, plus taking and using any data available from the personal appraisal and development systems of both companies.

By applying a robust, thorough and transparent consultation and redundancy process, this ensured that procedurally, the process met and indeed exceeded all reasonable standards for a fair redundancy dismissal, under the ETO provisions of TUPE and any redundancy related legislation.

With the exception of the account manager, this meant that the transferee company was able to fairly dismiss those employees who regrettably did not possess the type and level of skill sets required for the company to fulfil it and its client’s needs and to have a structure and skill set portfolio that would enable them to really benefit from the purchase of the transferor company. 

The result

Within three months, the performance management process provided the evidence needed, and settlement discussions began. An acceptable package was negotiated, allowing both parties to part ways professionally.

The final outcome exceeded expectations:

• The new structure was stronger, combining the best talent from both companies

• Remaining employees had greater job security in a more viable business

• The company gained the additional skills needed to capitalize on their acquisition

• Growth and service development accelerated beyond original projections

Sometimes the kindest thing you can do for your workforce is make the difficult decisions that ensure the business thrives.

"Taking everything and everyone on board would have actually placed the company's financial viability, long term performance, and job security of all employees at serious risk."

The alternative – keeping everyone regardless of fit or performance – putting everyone else’s jobs in jeopardy.

What this means for business

TUPE transfers don’t have to be a case of “all or nothing”. With proper planning and expert guidance, they can become opportunities to:

• Strengthen overall business capability

• Create more focused, effective teams

• Build a structure designed for growth, not one just inherited from the past

• Demonstrate to all employees that performance and contribution matter

Our takeaway

Risk is inherent in all business decisions and cannot be avoided, but with a careful analysis and the application of proper and robust HR practices and procedures, any risk can be at least minimised if not on occasions, be almost eliminated, especially with PSM on your side.

PSM's expertise in combining legal compliance with business pragmatism has helped dozens of companies turn challenging transfers into success stories.

Let's have that conversation.