Buyer Beware

Recent years have seen a huge growth in European cross-border mergers and acquisitions (M&A) and considerable attention has been given to how such deals arise and are completed. A U.S. investor must understand the basic difference in the principle of individual labor law in the U.S. and how it compares with the laws of the target country in an M&A. In the U.S. under the employment at-will doctrine the U.S. private sector employers can dismiss their non-unionized employees at any time for any reason or even no reason at all. In most European Union (EU) countries and Germany and Italy specifically employees are presumed to have a basic right to keep their jobs indefinitely. One of the greatest labor cost disparity with the U.S. is not wages. It is the amount of paid time-off and other benefits. Employers in Germany and Italy will find it difficult to discharge employees without incurring substantial liability. For high-level long-term employees these severance payments can run into six or even seven figures.