How to Properly Lay Off People During an Acquisition

When acquiring another company, there is always the potential that layoffs will need to take place to streamline the new organization. Of course, letting people go is never easy, but there are ways to do it properly to minimize damage to the individuals and the company's reputation. In this episode, Evelyn De la Cruz, Head of North America Administrative Operations at Spencer Stuart, discusses how to properly lay off people during an acquisition.

How to Properly Lay Off People During an Acquisition

28 Oct
Evelyn De la Cruz
Or Listen On:

How to Properly Lay Off People During an Acquisition

How to Properly Lay Off People During an Acquisition

"Whether it's in M&A or at any time, the minute the word layoff gets into the water in a corporate environment, everybody goes into a panic." - Evelyn De la Cruz

When acquiring another company, there is always the potential that layoffs will need to take place to streamline the new organization. Of course, letting people go is never easy, but there are ways to do it properly to minimize damage to the individuals and the company's reputation. In this episode, Evelyn De la Cruz, Head of North America Administrative Operations at Spencer Stuart, discusses how to properly lay off people during an acquisition.

special guests

Evelyn De la Cruz
Head of North America Administrative Operations at Spencer Stuart

Hosted by

Kison Patel

Episode Transcript

Reasons for layoff

The first and primary reason for layoffs during an acquisition is role duplication. 

  • Do you need that many people in accounting?
  • Do you now have too many people in HR?
  • Do we have too many people in IT?
  • How many people do you need to run the company?

It could also mean that the company is spinning off or shutting down parts of the operation that are no longer relevant or somehow getting subsumed. It's really deal specific, but often, it is because of duplication. 

No matter what  you're thinking about doing, whether it's day one planning or it's layoff planning, you have to understand what the strategy of the deal is.

  • Why are we doing this? 
  • Why are we spending this money? 
  • What are we going to achieve out of this?
  • What is that goal?

Part of layoffs is communication, both communications to the individuals we are laying off and with everybody including senior leadership, which is likely to be far more in-depth than what you might share with the rest of the organization. But ultimately, you still have to communicate with the remaining members of the organization.

The minute the word layoff gets into the water in a corporate environment. Everybody goes into a panic that they're going to be impacted. 

So the body of communication from senior leadership through the teams who are remaining becomes critical. You've got to get them all comfortable with the forward plan.

How to properly lay off people during an acquisition 

The primary is dignity and respect. It's a tough circumstance. Even when somebody thinks they see it coming, it isn't easy. So the first thing goes back to the business plan. You'll need that information in your back pocket because that will help you craft the communication to the individuals and, more broadly, to the press.

There are likely a few different versions of that at levels of detail. What you tell the warehouse staff is likely different than what you tell the board of directors. It should be the same theme, but it's probably in much more detail at the board of directors' level. 

  • What's the message?
  • Why are we doing this? 
  • What are we hoping to achieve? 
  • What is the reason we have too many people in whatever aspect it is? 
  • How are we going to treat this group financially?
  • Do we have a severance program already in place? 
  • Are we going to do or give them something in between? 

If you do it close enough to the deal's time, you can incorporate those costs into the deal. Different companies have very different severance practices so you have to rationalize that. 

The challenge with getting nice about your severance packages to get goodwill is that the remaining people may expect your ongoing severance package. So you have to be careful about what precedent or expectations you're setting. 

Then it comes down to how you execute this. How do you do this thing? There is no substitute for one on one. If it needs to be on Zoom, it's still one-on-one, or maybe there's HR in there with you to help with the details. 

We owe individuals the respect of having that as a private conversation. I would love to say do it in person, but I'm cognizant that the world keeps shifting, and in person, it is sometimes hard to do for various reasons.

It needs to be respectful and allow individuals to process. Many companies have different outplacement benefits at different levels of the organization. So benefits may truly be unique to you or at least within your layer of the organization. And you deserve to have those explained and have the chance to ask questions and do that in private.

Production Oriented Lay-Off 

I had to do some non-deal layoffs where we had to get a little production-oriented, that was, three to 4,000. So we took the big giant meeting room in our office complex, and we built a lot of curtain carols. 

We had the meetings with the managers back in conference rooms, out on site, and then people went to this central room to meet with a member of a large HR staff to get the details of their actual plan.

They had that moment in private with their manager to get the news, but then they had to go to a more central location to get the details of their package. I hated it. Every member of the HR team hated that particular event, but it was the only way we could process three to 4,000 people in one day. 

We had to get everything done in one day. But even when we did that production-style thing, they had two separate individual conversations, one with their manager and one with somebody from HR. 


If I go back to the professional services organization, it was made very clear from the get-go that there's an overlap and that we should expect there will be some layoffs.

It was interesting because what we were actually buying were the people and their connections. So we had to be super careful with that one about triggering turnover because otherwise your purchase just walked out the door. 

We laid off about 500 people and there was a really careful process before that. We sat down and looked at this entire department and this person. 

We were clear to find some places where we don't need as many functional staff as we have for our particular marketplace. And we're going to do our best to treat those people fairly and well. We're going to do it right before the actual merger closes and then we're going to move forward as one team. 

We're going to come through it before we're going to figure it out and then we're going to go forward together. It was difficult to get through because we didn't have any tools. Neither team could use the tools they had built because we were looking at a merged group and neither tool was ready to see the merged team. So there's a ton of manual to do it that way.

If we had waited three months until everybody was merged into one system, it would have been easier on the HR staff to actually get it done and done well. But the decision was made to ensure it was done before the deal closed. So that's one model, and we were able to be very clear about the intent. It gets murkier when a company is not clear.

Severance Programs

The easiest way to handle that is if you honor the severance program of one organization or the other because then you can just point to, we're going to use our standard severance.

It's not the merger that's driving what their severance is because that's our business practice. We're going to treat them like we always would. So that becomes a really easy communication

It's when you start to craft something new, something additional that you must be really careful. You don't want to set a precedent that two years later when you do a layoff for a completely different reason said you treated them differently.

The complication is if you don't have one. If you don't have a standard severance, then you can't fall back on we're using our standard severance. So it may be a good time to implement one to take a step back with the HR and leadership teams and implement a standard severance.

When I talk about severance, I think of it as the entire package. Typically, severance will include 

  1. A lump sum payment or a salary continuation. You'll see some firms as salary continuation, or you're still getting a paycheck for X period.
  2. Salary replacement. I think of severance as the dollar value you're going to get, the medical, dental, and typical life benefits you will have to continue on. Many organizations do that for the duration of your weeks of severance pay. Some do it for a fixed period of time. 
  3. Existing stock. For that, I would turn to the stock program, and hopefully, it's written already because there's enough governance around those programs that you want to be aware of.
  4. Outplacement and other types of services. Like the others, that's another place where you can sweeten the pot and offer longer services through an outplacement vendor or better services up their ladder of service offerings. Many organizations will do this by level. 

It's easier to get people off the books. If you're going to leave them on a salary continuation, it has to be really well written to cut off.

Some companies still want to do the pay-you-twice-a-month thing. But if we'd taken the time to research on LinkedIn when people got new jobs, there's much money we could reclaim because nobody ever reported in. 

So talk to your accountant, there might be reasons within a deal or an accounting preference for the firm to do it one way or the other. I like the lump sum, the best. It's the easiest, cleanest, and you're done. But I'm not a finance person, and I'm not an accountant. So they may have reasons they don't like that. 

Layoffs before or after the deal close

Suppose you've identified pre-close what's going on and what you need to do. And if you can do it sooner, the better. If you have yet to learn what's happening, then I would wait because you may let go of the wrong people.

It also comes down to the deal. What can you write off against the cost of the deal? That's where your finance team, your tax team, comes in. They may tell you that we would rather book that severance within a certain time. You look to them for guidance about how that deal is written. 

So I stick close to my finance team because they will have reasons from a financial perspective why it's better to do it in one time or another. 

If you're going to do it before closing, it has to be done by the existing organizations. It cannot be perceived as done by the acquiring organization into the target. The target has to do it. The acquiring organization has to do it. You got to be separate if you do it pre-close.

It's tough unless it's clear why you're going after the group you're going after. Tax is a big influence on everything in M&A, and not just spending money, but just the whole accounting.

I learned early in my deal days that there were things I could poke on and where I have got to figure it out. This is where building that business partner relationship, where you are at the front of the deal with that deal team the whole way through gives you the most flexibility.

If you're close in the beginning and marching the whole way through, you're planning that together and interactively. The best deals I've worked on are the ones where the whole team is involved as quickly as possible. At least the core team members. 

Additional attrition

There are a few triggers in my mind. 

  • Communication. Are they just going to hit us with another wave? I don't understand why they do this.You lose that engagement link to the company and that can drive turnover. Another aspect to it can be a 
  • Disagreement with the strategy of the organization. I really believed that project X was the future and you just laid off half of project X.
  • Who you keep. Who are the right people who keep your organization moving? You can keep somebody who has a very poor internal reputation. So, a bunch of people will leave because they don't want to work for that person. 

Certain key hierarchical leaders will end up staying with you for the deal, but you need to know who and why. So it goes back to what's the strategy. What am I after? When I'm buying this company, what am I after? But what do I have to do to make sure that the group around that person that I want to keep because, by the way, I need to keep those people at least for a while so that they stay and they're happy.

This is why being involved on the deal team early lets you have those conversations from the beginning. It gives you more time to start to understand those critical relationships. 

So the more time you have to meet that leadership team earlier in the process, the more time you have to figure out. In a really big deal, if you have time to do an organizational network analysis study, I highly recommend it. But there are ways to get at it.

Allocating HR people per number of layoffs

I don't know many HR people who can process more than 12 to 16 in a day. So sometimes you just have to send out the managers, hire some temporary help, and draft every single HR person you have in the organization.

You need to allow a minimum of 20 to 30 minutes per meeting. And if you're doing those one on ones, there's your math. And trying to get an HR person to do more than eight hours of that in a given day is really emotionally draining and difficult. 

If you can't get through it, then you gotta go multiple days. If I were to do that on multiple days, I would hit different units on different days so that you're hitting the whole unit. Versus a little bit over here and a little bit over there, and everybody sits on tantra hooks for the rest of the night. 

But it's hard emotional work. It's hard emotional work for the managers as well. If you're human, it's not easy. And that's why I, always get back to respect and dignity, treat somebody with respect and dignity.

It goes so far in how they can hear and how they absorb and what they share outside that the organization treated me decently. It sucks that I lost my job, but they treated me decently on the way out and that's huge. But in order to do that, the managers and the HR staff, there's a cost, there is an emotional cost.

Tips for the HR Team

It's you got to do it. After some of those big ones, you do have to take some recovery time group, whether it's a group or a downbeat individual. Come at it with that level of compassion, and it does draw it out of you. A small group getting back together and talking about it, just saying, How did your day go? What surprised you? What didn't work? A little bit of a debrief of what could we have done differently. 

The team that's doing the layoff performing the meetings needs that chance to come back and decompress. And you know what, sometimes if you can do it, giving them a day off as well, so decompress. 

People need that chance to get their heads back and resettle. So I think that's really important to quickly follow on the leadership side by those staff meetings, with the remaining people saying, we did this and it's done, and now we need to work together.

Breaking the news

Typically, the manager role is at most three or four sentences. The less you say, the better. You never want to apologize. You never want to say the word sorry. It's just it doesn't work. 

It doesn't mean anything. You can say; unfortunately, your role is one of those impacted. Evelyn's going to walk you through your package. And then I'll go back to your desk with you to gather your things. 

Different offices and companies have different policies about how fast they want you out the door. Some of them are right now, or other companies walk you out.

I would do that based on what your traditional pattern has been. Keep your traditional pattern the same now. So then the manager would exit, and I would walk somebody through their package. 

Typically, the manager or another member of management would then be waiting for them to walk them back to their desk, gather up their things and see them out. And then, the HR person goes on to the next one. It's a little crazy. 

There are some companies where you can stay 30 or 60 days. From a risk perspective, a business risk perspective, if you can tolerate it, that's actually a really nice way to do it. Because then people feel both themselves and the people around them that they had the chance to apply for other jobs, to look for and apply for other jobs while they were still employed with the company. 

Lawsuits directly related to layoffs

Typically they're one-offs. Age or other discrimination, you have to be careful with your warning activities and your adverse impact analysis.

If you're not doing an adverse impact analysis, you need to be. Any lawyer worth their salt will tell you that even if you don't know how to do it yourself, you turn it over to an outside lawyer, and they'll do it for you. But that's critical because that is usually your key to heading off a lot of that lawsuit activity. 

The other thing is I would never give out a severance package, whether for a layoff or for a performance basis, without a release attached to it. So you don't get your money without a release. So once you get that release back, that precludes most lawsuits. 

You want your release to be very carefully worded. You certainly don't want to be having a gregarious violation of different policies and practices that you're now asking people to sign away their rights to sue. But you definitely want that release in there. 

But there's always somebody in the big ones that will reject your severance package and sue instead. And for me, I go back to having really good standard HR policies. If you're doing the right things from an HR perspective all the way through, you've got your defense for a lawsuit. You're going to be okay from the lawsuit.

If your HR practices are shaky, that could get messy. And I've seen organizations with shaky HR practices. And day to-day gets messy, let alone in a layoff or in a merger. 

What to avoid when laying off people

  1. Don't apologize. Be gentle. Be clear about why and what is this really doing in the business in your own head as well as in your communications. 
  2. Make sure it makes sense. When I'm sitting with a deal team or a business unit going through a deal, and we're talking about this, how does this play? Where's our ROI? How is this really going to help us be stronger? How is this going to save us money and not hurt us along? It'll be really clear about that strategy. 
  3. Avoid, if at all possible what we like to call death by a thousand cuts. So don't do five people and then next week, do five more people. We try to even try to avoid monthly. 

Figure out what you're doing and do it. But every time you go back to bite that apple, it just demoralizes the remaining people more and more. Suppose you think you're going to have to go deeper. In that case, you're actually better off either waiting for just a little until you know how deep you need to go or taking a guesstimate and going a little deeper than you initially thought to avoid doing a second one in close proximity.

As an HR business partner, I'm at the table; that's a requirement for me. And that means I'm looking at the business. So I just happen to be focused on how people are impacting the business.  

If you're sitting over there as an HR person, afraid to speak up because you think you don't have as much knowledge or right to speak up about what's happening in that deal as anybody else, learn it.

Wherever you feel like you don't truly know, go learn. So that when you're in those conversations, and they're talking about the wisdom of the deal, and should we do this cut and what will it take that you can be a member of those conversations, just like you can at your business leader staff meeting. 

You just happen to be focused on the people. Whether it's M&A or it's any HR role, know your business deeply and know all the pieces of your business to the best of your ability. Be willing to speak up in a diplomatic but thoughtful, data-driven way. I worked for Amazon for a number of years. There are a few things in their leadership principles that I live by all the time. 

Know your business, all of it, as much of it as possible because you're going to be a better partner in every facet if you know your business. 

Disagree and commit. Have your data. Be able to have that conversation in the room as a team with the whole team committed that this is how we operate.

The customer is always in the room. Whether you're talking about a deal and you're talking about layoffs in the deal, your mindset needs to be; there's an employee in the room.

What are they going to say? What are we going to tell them? How are they going to feel about what we're talking about? Is this serving their needs? 

And it's no different if you're doing an M&A, a layoff, whatever you're doing, but have the mindset that says that person sitting in the corner in the room, that client is here, are we serving them in what we're doing?

And I live by those three things, no matter who I've worked for since I left Amazon many years ago. And it makes a difference everywhere I am in every role I play. And it certainly makes a difference when I'm doing deals. And it makes a difference when we're trying to figure out how to get our way successfully through a layoff.

Show Full Transcript
Collapse Transcript
Related eBook

Just a second
Oops! Something went wrong while submitting the form.

Get our weekly exclusive M&A tips

We’re always recruiting people as obsessed with M&A as we are. Join a community of forward-thinking practitioners to keep up on the latest M&A trends.
Take a break each week to hear from top practitioners and browse upcoming podcast episodes. You’ll also have access to exclusive content, events, job opportunities, and the occasional surprise.


Join our M&A community
Get weekly updates about our upcoming podcasts, webinars and events!
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.