Running Head: ETHICAL & LEGAL ISSUES. 1

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Running Head: ETHICAL & LEGAL ISSUES.
Ethical & Legal Issues
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1
ETHICAL & LEGAL ISSUES.
Introduction
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The contents of this document identify specific legal and ethical issues that should be
considered before, during, and after a merger. I have also developed an implementation plan for
managing the potential legal and ethical concerns for the merger, explained how the proposed
plan would help managers establish an ethical work environment as well as develop a plan on
how to resolve ethical and legal issues.
Legal issues that should be considered before, during, and after the merger include,
The management of the company first has to be aware of and adhere to the Sherman
Anti-trust Act of 1890. The act prevents businesses that engage in uncompetitive behaviors such
as monopolism and cartelism. The management of the companies should thus ensure that the
merger does not result in the formation of a monopolistic company within its industry or a cartel
that can determine market prices as well as exploit consumers. If the merger will result to
monopolism or cartelism, the takeover will be barred by the government (Shannon & Mary
2012).
Both managers of the merging companies must also look at employee employment
contract agreements. The contract agreement mainly states the contract period or when the
employment period will end, the number of hours the employee is supposed to work, the gross
salary that the employee will be paid throughout the contract period, how long an employee
should be on holiday or sick leave and whether or not the employee will be compensated while
on leave or holiday or not, details of the company’s pension as well as deduction scheme,
ETHICAL & LEGAL ISSUES.
3
employment termination as well as disciplinary procedures including employee retirement period
(Harry 2012).
There must also be shareholder approval with regards to the merger. Ensuring that there
is shareholder approval prevents conflicts that may arise from shareholders after the merger. The
shareholders will thus approve the consolidation of the company’s stock, assets, financial
statement, workforce, client base with that of another company (Harry 2012).
The newly formed company will seek regulatory approval if the industry it is operating in
has a regulator. The newly formed company must thus register its new company name as well as
be tax compliant as a single entity. The management of both companies’ must also look at the
various agreements and contracts that both companies’ are engaging in. Agreement and
contractual arrangements will be transferred to the new company. Debts as well as liability will
also be transferred to the newly formed company (Shannon & Mary 2012).
Ethical issues that should be considered before, during, and after the merger are,
A company that is merging may fail to disclose and hide negativity within its operations,
such negativity will include, recent loss of market share and vital customers, recent increase in
the costs of operations, recent increase in competition from competitors, recent increase in debts
as well as liabilities as well as increase in threats within the company’s business environment.
Due to unethical practices by some business managers, mangers opt not to disclose any
negativity within its business so as to ensure a successful merger as well as a successful
continuity of their business (Brian 2015).
ETHICAL & LEGAL ISSUES.
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The merger should not be hostile but friendly, the merger should thus be aimed at
benefiting all the stakeholders of both companies, there must be no management wrangles with
regards to who will head the newly formed company, and all grievances should be handled in the
correct manner such as arbitration or through the judicial systems. Information of the two
companies such as financial information, customer information or shareholder information
should be kept confidential from the public as well as from competitors. The need for
confidentiality mostly occurs when the company is a private company. The termination of
employees should be done in the correct manner. Termination should thus be based on employee
employer contract agreement. Terminated employees should also be compensated for the efforts
they have put within their companies (Brian 2015).
An implementation plan for managing the potential legal concerns for the merger
In order to successfully manage any legal concerns that arise before, during and after the
merger, the management of both companies should investigate as to whether a merger will lead
to a business that will be a monopoly or a cartel in the market place. There should be the
formation of a new employee contract or the adoption of an employee contract from any of the
two companies. An employee contract should ensure that there is management and employee
consultation before coming up with the final draft. Both major and minor shareholders should be
made aware of the merger in a timely manner. Voting with regards to whether the merger should
take place or not should be conducted in respect to the companies’ rules, regulations as well as
the companies’ memorandum of understanding and article of association. Regulatory approval
ETHICAL & LEGAL ISSUES.
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and guidance should be sought. Both companies should seek legal advice before, during and after
the merger and arbitration should be sought in case misunderstandings arise (Helén at. el. 2012).
An implementation plan for managing the potential ethical concerns for the merger
To better manage ethical concerns that may arise, those involved in spearheading the
merger as well as acquisition must be competent individuals. Competency ensures that unethical
behaviors or conducts do not occur. The managers of both companies must disclose all
information regarding their company including any cases of, recent loss of market share and vital
customers, recent increase in the costs of operations, recent increase in competition from
competitors, recent increase in debts as well as liabilities as well as recent increase in threats
within the company’s business environment. To better understand the business environment of
both businesses, a SWOT and PESTEL analysis should be conducted. A financial audit of both
companies should also be conducted so as to help determine the true value of each company.
This allows fairness during merging. An employee retrenchment plan should also be
implemented. The employee retrenchment plan will allow for a fair and ethical retrenchment
process (Helén at. el. 2012).
How the proposed plan would help managers establish an ethical work environment.
The proposal plan will help managers establish an ethical working environment the
following ways;
ETHICAL & LEGAL ISSUES.
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 A fair retrenchment process will give fair retrenchment to employee regardless of their age,
race, nationality as well as positions within the company.
 Ensuring that only competent individuals are involved in the merging process will ensure a
smooth transition process that is free of bureaucracy.
 Conducting a financial audit will allow managers to determine the true financial value of
both companies.
 Conducting a SWOT and PESTEL analysis will enable managers to identify the strengths
and weaknesses of both companies as well as the opportunities and threats of merging.
A plan for how to resolve legal issues
Legal issues can be solved through mediation whereby a neutral party will help both
companies reach a concrete agreement. Mediation leaves both parties to take control of the
outcome of the dispute in an orderly and professional manner. Arbitration can also be used to
help solve disputes whereby a neutral party weighs the argument of each company and makes a
decision called an “award”. The decisions made through arbitration can either be binding or nonbinding, binding in the sense that both parties will accept the decision of the arbitrator to be final
while non-binding means that if both parties are not satisfied with the decision of an arbitrator,
they can request for a trial. Legal issues can also be solved through a settlement conference
whereby the lawyers of both companies’ meet a judge who will act as a settlement officer who
will help both parties evaluate the strengths and weaknesses of their case and help them come up
with a settlement (Helén at. el. 2012).
ETHICAL & LEGAL ISSUES.
Conclusion
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Mangers of companies that are merging must ensure that the process is conducted in an
ethical manner, laws should also be adhered to, the outcome of the merger should benefit the
parties involved plus any issues that may arise should be handled in a way that is free and fair.
ETHICAL & LEGAL ISSUES.
References
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Shannon Zollo & Mary Beth Kerrigan (2012) Top Ten Issues in M&A Transactions Retrieved
from http://www.mbbp.com/resources/business/top-10-merger-issues.html
Harry Rhodes (2012) Identifying Issues in Facility and Provider Mergers and Acquisitions
Retrieved
from
http://library.ahima.org/xpedio/groups/public/documents/ahima/bok1_049354.hcsp?dDoc
Name=bok1_049354
Brian
Hill
(2015)
Ethical
Dilemmas
in
Business
Mergers
Retrieved
from
http://www.ehow.com/info_7924152_ethical-dilemmas-business-mergers.html
Helén Anderson, Virpi Havila, Fredrik Nilsson (2012) Mergers and Acquisitions: The Critical
Role of Stakeholders Routledge
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