Episode 91: Cautionary tales in M&A immigration compliance

Episode 91: Cautionary tales in M&A immigration compliance

This episode of the BAL Immigration Report is brought to you by BAL, the corporate immigration law firm that powers human achievement through immigration expertise, people-centered client services and innovative technology. Learn more at BAL.com.

Intro & News Highlights

In this week’s episode, BAL’s Edward Rios and Femi Adeyemi discuss compliance issues that often get overlooked with foreign national employees during mergers and acquisitions and company restructures. Plus, the latest immigration news.

From Dallas, Texas, I’m Rebecca Sanabria.

Spotlight

In 2023, 48,833 M&A deals were executed globally.

When it comes to mergers and acquisitions, company due diligence focuses primarily on the financial, legal and operational variables of a deal.

However, what often gets overlooked with companies who have foreign nationals on staff are time-sensitive immigration law matters which, if neglected, can result in unfortunate outcomes for both employers and employees.

BAL partner Edward Rios and associate attorney Femi Adeyemi, both in the Boston office, joined the BAL Immigration Report to talk about a recent biotech event they attended that spurred a discussion on critical immigration compliance issues employers should consider as part of their M&A integration planning.

Rios: So welcome Femi, I understand that this is your podcast debut.

Adeyemi: Yes, yes. Thanks, Edward. This is my first feature on a podcast. My lovely wife hosts a podcast and she’s been hinting at a collaboration with me, so this is a good start. Glad to be here today and looking forward to it.

Rios: We will get you ready for that collaboration. So I wanted to talk about an event that we attended. It was a Biotech in Boston event that was sponsored by the Boston Business Journal last month. Since we’ve attended, I’ve had some really interesting thoughts on the three different panels. I’d be interested in your perspective on a couple of those points.

The first was the state of merger and acquisition activity and IPOs, mostly merger and acquisition activity in Boston and the state of the market. I thought that was fascinating. The second panel was on, interestingly enough, real estate in Boston — corporate real estate, both labs and office space. And then the last was perspectives from leaders in biotech.

Interesting for us, we always see the immigration connections in anything that we’re participating in, and I found stuff in each of those. Obviously, the M&A activity triggers all kinds of compliance issues and thoughts. Even real estate, most people wouldn’t think about involves whether folks are working in one location or working in another at home — for example, during COVID — and all of the immigration compliance and considerations that are related to location of work.

And finally, of course, was the CEOs and founders of these companies. Thymmune’s CEO was there, as well as the CEOs from Cellino and Fractyl Health — three very interesting companies. They covered all of the considerations that they as founders and CEOs take into account in running their businesses, including talent acquisition and attracting the best and the brightest to work on their projects. And again, just immigration came to the foreground.

I’d love to hear what you were thinking as we were sitting there in the front row about some of the M&A considerations, compliance specifically.

Adeyemi: First, I’d like to note that I thoroughly enjoyed the event. I thought the most interesting panel discussion was focused on the M&A activity in the biotech space in Boston, and that’s because many of those points discussed affect my day-to-day with my clients.

U.S. immigration laws are incredibly complex. Corporate restructuring is a complex process involving many challenges and considerations for the companies involved. I wish I could say never the twain shall meet, but for U.S. companies or multinational corporations, corporate restructuring and U.S. immigration compliance requirements for foreign national populations regularly intersect.

Unfortunately, U.S. immigration compliance may not be top of mind, which could lead to potential severe consequences in many cases for the company and/or the foreign national. But thankfully, BAL delivers immigration expertise needed to assist these clients in these situations. And that’s a lot of my day-to-day.

Rios: I see it as well, across the whole continuum. It depends on the size of the company, the size of their foreign national population and the group that we’re working with.

I see interesting themes as well, that some clients are very proactive and understand when to initiate discussions with counsel and where and how long the process will take. Others come to it a little bit later, and still others, I think it catches them a little bit at the end and as an afterthought.

What has your experience been there? Have you seen companies that have figured it out early, came to it late?

Adeyemi: Yeah, I’ve seen a mix of that. I think companies, depending on how sophisticated their immigration program is, really will determine the timing of when they come to us.

And the timing does make a huge difference, because depending on how soon or how quickly we’re aware of this, we can advise and we can take certain steps to ensure that the client remains compliant and their foreign nationals are minimally impacted. Not trying to get too technical, but, you know, with the different visa types, there are certain considerations.

Take the H-1B or an E-3, for example. When there’s M&A activity, we have to be very cognizant of what the effect will be because certain foreign nationals in H-1B or an E-3 will need to take certain actions. We can work with the employer to ensure that these actions are taken, timely and they remain compliant.

If it so happens that we are aware of this after the fact, there are certainly things we can do to ensure that, you know, that compliance aspect is maintained. But again, the strong advisement is to come early on in the M&A process.

Rios: So why don’t folks? I’ve got my theories. Some folks will make the phone call early or send the email right away, but others don’t. Any correlation?

Adeyemi: First, I think it depends on how sophisticated the program is. If you have a small employer, they may not necessarily understand that there are implications of being acquired by a larger company. If you have larger employers or employers with thousands of foreign nationals in their population, they may understand and they may be more proactive. But that’s not to say it’s consistent across the board, because I have seen large companies in some cases come to us after the fact.

Rios: That’s a good point. I also see a little bit of a disconnect between internal groups. You are really talking about the mobility program itself and how they’re managing it, and sometimes they’re not really looped in on the M&A activity until too late. It’s not any fault of their own — they’d be proactive if they had the information.

And so the disconnect I’ve seen — and this is for both smaller immigration programs to larger, smaller companies to larger, it can happen anywhere — is they are simply not communicating because folks don’t believe that there is an immigration issue. They think that immigration itself is one of the more minor issues, and in a large merger and acquisition, it really would be realistically.

But it is one of those issues that can bite you for interesting reasons, like the personnel that would come over in the M&A activity might hold the patents for important discoveries and technologies that the acquiring company is looking to obtain. And they’re just assuming that the foreign nationals will come along and it’ll be a relatively easy process. I think they don’t realize how slow U.S. immigration can be or which boxes need to be ticked when.

I hear you laughing. Does that sound familiar?

Adeyemi: Yes, it does. And further to my point on compliance, there’s another aspect, which is also talent acquisition and talent retention, which I think you’ve alluded to here.

A lot of times when we have these M&A activities, the result is someone somewhere needs a visa right away. These things take time — as you know, Edward — and certainly I think those expectations need to be appropriately managed. And if they’re not, it could result in delays for the company, for the foreign national.

Rios: You mentioned delays. We’ve talked about being proactive and that being the positive outcome. When you say the word delay, of course, everybody lights up in immigration. That’s not something that we like. We work very hard to eliminate delays or at least advise folks on what they can expect.

Do you have any cautionary tales that you’d want to share about maybe when it didn’t quite go as planned? And the reason I’m asking is because I’d like to end with some takeaways for everybody to really consider where they can make connections within the organization, where they can consider immigration within these activities and just generally how to stay out of trouble.

What are your thoughts there before we offer pearls of wisdom?

Adeyemi: I have a couple of examples I can share. The first example was a midsize client or a midsize company — midsize being around 200 to 500 foreign nationals in their employee population — acquiring a smaller company. And so a handful of employees of the target company, of the target company’s foreign national population, were nonimmigrant status and they were impacted by the acquisition.

Thankfully, we were informed of this acquisition before the fact, and I think it wasn’t actually intentional. I think it just came up in a regular client call. The point is, we were able to take the necessary actions to keep the foreign nationals in status and keep everything compliant.

The second example is similar to the first, so a good ending there. This was a larger company with thousands of employees acquiring a smaller company, and a good number of employees in the target company were nonimmigrant visa status and were impacted by the acquisition. Unfortunately, we were informed after the fact, after the deal had closed.

Our team, thankfully, was still able to work very closely with them to ensure compliance. But it did add additional delays, like we mentioned. And also, there were additional financial commitments on the company’s part because the deal had already closed.

A worst-case scenario here, so the cautionary tale, was a large company undergoing a major workforce corporate restructure, including divesting multiple U.S. entities. One of the entities, or an employee at one of the U.S. entities, was impacted by this. Unfortunately, due to the timing of it, there were no options. There were very limited options, and the employee did have to depart with their family, a very unfortunate scenario. It was fixed after the fact much later on, but they did have to depart. You do have to spend some time outside before you can return and other considerations like that.

The point here with this cautionary tale is there are usually options, but the more we get into the M&A activity, the longer time goes, the more limited these options become.

Rios: I’ve certainly experienced that cautionary tale too, and we didn’t have such a happy ending. I’m glad you and the team were able to bring folks back. I’ve seen it in years past where the employee was not able to return and resulted in either termination — both scenarios, termination by the company or the individual was so frustrated with what had happened that they left the company and went on to the competition, which is not a great outcome.

Not to end on a cautionary tale and difficult thing, let’s raise everyone’s spirits. What would you say are some takeaways? What can people do to stay out in front of this, specific to the M&A activity, but just generally even for smaller startup companies that are looking for that exit and an acquisition? What are things that they should keep on their radar? If we’re talking to some of these CEO founders, what would we say?

Adeyemi: At the program level, I would say one big takeaway is to plan accordingly. Earlier is usually better in these cases.

Inform immigration counsel, bring us in early into the process. I completely understand, the program manager may not be privy to some of these details, and certainly a lot of the ongoing efforts are confidential, but as much as possible, loop counsel in so that we can advise, even if it’s very generally on what to do to keep the program moving, keep the foreign nationals in status and compliant after the fact.

One other takeaway I will say is there are always options. While we cannot un-ring some bells, they’re usually options available. But importantly, options may become less viable and potentially more expensive as time passes.

Rios: Nobody wants slow, difficult and expensive. I hear you there. You know, when you mentioned being proactive, one thing I was thinking — not at the program level, but within the organization — so this has nothing to do with calling your lawyers.

I think a helpful takeaway is for the program managers or even the founders and CEOs or C-suite folks that are watching over this M&A activity, one of the things that I’ve seen very successful C-suite and leaders do is connect dots. They do this professionally, they do it at a very high level. And what they’re doing in this space, where I’ve seen it most successful, is where the leaders are connecting the M&A folks — their general counsel internally, the folks that are working on the deal — with the various stakeholders within the organization. And that’s happening organically throughout.

But they also think about personnel. So a good CHRO will understand that there’s going to be a foreign national population that might need something special. And they’re connecting the dots to those program leaders.

At the organizational level, you have better and more transparent communication. That doesn’t mean they’re disclosing every aspect of the deal. We understand a lot of this stuff has to be under wraps. But what I think they do really well, and I’ve been impressed by seeing, is they will give the right whisper to those teams to say, “Can’t tell you what’s happening. It’s project XYZ, probably Q2 next year, not certain, but it will involve something that may impact your personnel. Understand how you would move people across different entities.”

And the smart program leaders get it. They understand. They don’t ask questions they’re not supposed to ask, and they go forward and plan. That’s where I think the “plan accordingly” tip that you shared really comes in.

If I were to add that organizational layer, it’d be internal communication. So what I usually advise folks is if you ever think you’re going to have this kind of activity, get to know these folks in other departments, other stakeholders, even if they’re not part of your normal world, because at some point they’re very likely to become part of your world and it’d be great to have those relationships.

One of the things that we do do is get as early and up into the program planning schedule as possible for that M&A activity and the cycles. Specifically, if you have organizations that are sales based — so they work on projects, as in professional services, it could even be manufacturing if they have large bids coming in and they understand that it’s a sales-driven thing — get to know the sales folks. The folks that are closing the deals are going to be the first ones to know. Then they’ll trigger the internal lawyers.

Those lawyers will then go on and talk to other folks within the organization. You wouldn’t normally think to connect your HR folks with your sales apparatus internally, but it works.

Sanabria: Find more expert insights and client stories at bal.com.

*Source: https://news.bloomberglaw.com/bloomberg-law-analysis/analysis-despite-q4-boost-2023-m-a-deal-volumes-disappoint

Top immigration news

And now, the top U.S. and global immigration news.

U.S. Citizenship and Immigration Services automatically extended the validity of permanent resident cards, also known as green cards, to 36 months for lawful permanent residents who file Form I-90, Application to Replace Permanent Resident Card.

The U.S. Embassy Philippines will open a new Visa Application Center in Parañaque City, part of the Metropolitan Manila area, and launch a new online appointment system on Sept. 28.

In global news, the government of the United Kingdom announced the list of nationalities that will soon be able to apply for an Electronic Travel Authorization as part of a new Statement of Changes.

In Ireland, officials welcomed the Employment Permits Act 2024 into law, bringing changes to the country’s Employment Permits System.

Copyright

The BAL Immigration Report is provided by BAL. Copyright 2024 Berry Appleman & Leiden LLP. All rights reserved. Digital redistribution to the public is permitted only with express written permission of Berry Appleman & Leiden LLP. This report does not constitute legal advice or create an attorney-client relationship. Visit bal.com for more information.