Divestment remedies are a common tool for competition authorities to eliminate competition concerns. Recently, there have been several cases where the divestment was mostly limited to key personnel without any other significant tangible or intangible assets. The transfer of personnel poses particular implementation risks as employees cannot be acquired like assets but are free to resign and move to another employer. In the following I discuss insights about how to manage staff divestments from a recent case in the UK foster care industry on which NOCON acted as monitoring trustee.

The Competition and Markets Authority (CMA) cleared the merger between two fostering placement services (NFA/Acorn) in phase 1 after NFA proposed divesting Acorn’s operations in three areas. In two of these three areas the divestment business was essentially limited to carer families and support staff which had to be carved-out. From my experience, the key factors for limiting attrition and achieving a successful divestment are good communication, flexibility and a speedy process.

Regular and open communication

A divestment, by its very nature, creates change and uncertainty for staff, in particular when it involves a carve-out situation where personnel needs to be integrated into a new organisation. Open communication, regular updates and the possibility to feed into the process help to mitigate uncertainty and frustration. Staff should feel involved in the process and have the possibility to express their views.

Additionally, for the merger parties it can be helpful to understand the views and concerns of staff regarding the divestment. For example, it is useful to know if staff have strong views as to what kind of acquirer they prefer or dislike. While it remains at the merger parties’ discretion whom to propose as purchaser, I would advise to take staff’s preferences into account as staff satisfaction is beneficial.

Adjust flexibly to changing circumstances

Merger parties and competition authorities may need to react flexibly to changing circumstances. In the NFA/Acorn case, some of the carers, who were initially in the divestment package, were opposing the transfer to a new purchaser mainly due to existing relationships and support networks that they didn’t want to lose. For the same reason a number of other carers, who were initially outside the divestment parameter, wanted to be transferred to the new purchaser. Thanks to the flexibility of the merger parties and the CMA, it was possible to accommodate these preferences of the carers and a positive outcome could be achieved.

In other circumstances different measures might be required to ensure the transition of staff. Financial incentives might be one option, however, such incentives are not appropriate in all sectors (like foster care, for example).

Speed is of essence

An efficient and expedited divestment process is very important. The longer the uncertainty about the future purchaser lasts, the more likely it is that staff will be tempted to look for alternatives or accept offers by third parties. Therefore, competition authorities usually set ambitious deadlines and merger parties should dedicate sufficient attention to the process to meet these deadlines.

Monitoring trustee facilitates process

Competition authorities often use monitoring trustees to support the implementation of merger remedies. Especially in a situation, where the divestment business almost exclusively consists of staff, the trustee can add significant value to the process.

The monitoring trustee should ensure that a good communication strategy is in place. Depending on the circumstances of the case, the monitoring trustee might also communicate directly with staff as they might speak more openly about concerns with the trustee. Additionally, staff might have more confidence in the divestment process knowing that it is being monitored closely. The trustee can also provide helpful advice, how to react when circumstances change, and facilitate the communication with the competition authority.


Wolfgang Nothhelfer, Partner at NOCON