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Power Plant Acquisitons: Workforce Management from the Buyer's Perspective

Fortnightly Magazine - December 1998

must align itself with the changing structure of the business. For example, to have boiler turbine operators belong to the same local as linemen for a power generation company would not likely support the buyer's business strategy. Notwithstanding union cooperation, the buyer might decide that the role of certain traditional union positions (em such as boiler turbine operators (em have expanded to the point where it no longer makes sense for them to belong to the bargaining unit. A union may not welcome the use of devices such as a unit clarification petition filed with the National Labor Relations Board to remove a whole job classification from union control. However, such institutional sacrifices may be appropriate to better preserve the integrity and value of the remaining unionized workforce.

Pushing the Seller:

Pre-Closing Strategies

Beyond due diligence, a prospective buyer should exercise as much influence as possible on a seller prior to acquisition to minimize the length of any CBA beyond the closing, and minimize commitments to the union on future staffing levels, wages or benefits. The buyer should prevail upon the seller to accomplish as much of any planned workforce reduction as possible prior to the closing, yet retain the core of the skilled workforce. The buyer would not often want the seller to make attractive offers of continued employment in other parts of the seller's business. Very few, if any, buyers can afford a major talent drain from an experienced generation facility workforce.

While having in place a long-term CBA may provide needed stability, the locked-in labor cost and work rule structure may diminish the value of the assets. Also, a buyer forced to "blow up" an entrenched union deal for competitive reasons will likely find it more difficult to quickly establish a cooperative union-management relationship.

At some point in the acquisition process, a buyer is going to bump into the "usual suspects" of workforce transition issues: wages, medical benefits, retirement savings, and leave accrual.

In general, the buyer should not attempt to duplicate the seller's benefit plans. The buyer often does not have a full appreciation for the seller's medical plans to globally adopt them and, in any event, the buyer may be in no position to offer the same range of benefit choices. A buyer will often want to stick with the benefits scheme it knows best. That is particularly true in the pension and savings arena, where attempting to take on a seller's existing qualified pension and 401(k) plans can create costly liability and logistical nightmares. (See T.A. Jorgensen, "Handling Employee Benefits in Mergers and Acquisitions," Employee Benefits In Corporate Transactions, pp. 1-36 1994.)

Where the buyer does not accept transfer of the seller's 401(k) plan and trust, both buyer and seller must work out the fund rollover and loan issues created by the "same desk rule," which can limit transition to a new employer's savings plan. (See K. N. Brown, "Separation from Service and the Same Desk Rule: Distributions from Section 401(k) Plans," Journal of Pension Planning & Compliance, pp. 23-34, Fall, 1995.)

Where a buyer is