PE acquirers should view unions as stakeholders and factor possible or actual engagement obligations with them into the deal process.
By Kendall Burnett, Tom D. Evans, David J. Walker, Paul Lawrence, and Catherine Campbell

Widespread economic pressure — including pay, inflation, and the ongoing cost of living crisis — has increased union visibility. As the number of workers interested in union membership grows and the frequency of strikes surges in the UK and elsewhere, PE deals teams should remain mindful of the presence and role of unions in M&A.
Unions in focus
In June 2022, the Trades Union Congress noted that online enquiries into union membership had risen 700% since members of the National Union of Rail, Maritime, and Transport Workers took strike action over pay, jobs, and conditions. UK union activity tends to be sector-linked, with membership highest in the heavy industry, manufacturing, transport, automotive, shipping, healthcare, and education sectors — sectors that are often targets for PE deals. However, general increased interest in union membership in the UK, plus recent trends (particularly in the US) towards unionisation of hospitality and technology businesses, could mean that unions become commonplace in a wider variety of private sector industries.
Further, the UK Parliament has introduced a new bill that, if passed, would allow the UK government to set minimum service levels during strike action by key workers (i.e., emergency and rail workers). While this legislation is early-stage, such governmental focus highlights an evolving area that warrants attention.
Union/works council engagement
If a union or other employee representative body (e.g., works council or staff forum) is recognised by the target group, PE deal teams scoping a transaction should understand early in the process if any terms, including on pay or redundancy, are collectively negotiated, whether any strikes have been made or threatened, and/or whether the transaction triggers any information/consultation rights. Deal teams should also consider any legal consultation rights that employees may have, irrespective of any union/works council recognition — on an asset deal, employees in many jurisdictions have the right to be informed and consulted with.
Whilst union/works council presence is relevant in any M&A transaction, employee representative arrangements are particularly relevant in UK public-to-private deals. The UK Takeover Code requires certain documents to be made available to employees or their representatives about the transaction, and also provides a right for employee representatives to publish an opinion about the transaction and its impact on employment/employee matters. Early diligence will enable PE acquirers to plan for union/works council engagement.
Engagement can be time intensive and could impact transaction structure and deal timetable. For example, if a works council is recognised in France, a “put-option” structure may need to be used. Unions/works councils could also request assurances relating to an acquirer’s plans post-acquisition (including in respect of restructurings) so far as they relate to workers. Potential restrictions from such engagements will sometimes need to be factored into deal pricing.
Positive and proactive engagement will typically be well received by unions/works councils. PE deals teams should, when unions must be consulted with (or might otherwise become interested in a transaction given its potential impact on employees), ensure they approach engagement in this way. Doing so facilitates successful talks and builds a positive relationship with workers at an early stage.
How much impact?
Whilst navigating union/works council arrangements can add more work, UK unions cannot unilaterally block transactions, unlike in some EU jurisdictions such as the Netherlands. The presence of a union/works council will not always be problematic in a deal scenario, and PE deal teams need not fear embarking on a transaction in which a union is recognised.
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