Adapting to Regulatory Changes in the Staffing Industry: Best Practices for M&A

The staffing industry operates in an environment where compliance to constantly evolving laws and regulations is crucial. As M&A continues to shape the industry landscape, staffing companies must navigate regulatory changes effectively to avoid any complications during the deal process. Apart from ensuring smoother deal flow when the time comes to make an exit, staying on top of regulatory changes helps mitigate risk and avoid operational issues. Below are a few ways staffing owners can actively adapt to evolving staffing regulations.

Conduct Thorough Due Diligence?

In the staffing industry, regulatory compliance is a paramount concern. When pursuing an M&A deal, conducting thorough due diligence is essential to assessing the target company's compliance history, potential liabilities, and any regulatory risks that could come with the transaction. Both buyers and sellers must conduct thorough background checks to ensure that potential partners are compliant to local, state, and federal regulations.

Stay Up-to-Date on Industry Regulations

Staffing companies involved in M&A must stay informed about the evolving regulatory landscape to effectively adapt to regulatory changes during a transaction. This includes monitoring legislative and regulatory developments, understanding industry-specific regulations, and actively participating in industry associations and networks. By staying informed on current staffing industry regulations, both buyers and sellers can proactively identify potential regulatory risks and take necessary actions to address compliance gaps before going to market or seeking to acquire.

Engage with Legal and Compliance Experts

Working with third-party legal and compliance professionals that are experienced in the staffing industry is critical for navigating regulatory changes during M&A. These experts can provide guidance on compliance requirements, assess potential risks, and assist in structuring the transaction to minimize regulatory hurdles. Staffing firm owners are encouraged to engage with third-party teams when going through M&A, so current leaders can focus on running the business as normal.

Develop a Comprehensive Integration Plan

A well-defined integration plan is crucial to successful M&A in the staffing industry. This plan should make room for regulatory compliance, aiming for a seamless transition while adhering to new or modified regulations. Integration strategies should address licensing, employee onboarding, training, record-keeping, and data privacy. By integrating compliance considerations into the overall integration plan, staffing companies can effectively adapt to regulatory changes and maintain a compliant and cohesive post-merger operation.

Provide Ongoing Training and Education?

Regulatory compliance is a shared responsibility within an organization. After an M&A transaction, it is crucial to provide ongoing training and education to all employees on the new regulatory requirements and compliance policies. This includes educating recruitment teams on updated policies, procedures, and reporting mechanisms. Regular training sessions and communication channels for employees to seek clarifications and report concerns will help embed a culture of compliance throughout the organization.

Establish a Culture of Compliance Among Teams

Maintaining a culture that puts importance on staying compliant to staffing industry regulations reaps rewards in the long-term. For staffing leaders, this involves implementing robust policies and procedures, conducting regular internal audits, and establishing effective risk management practices. Staffing companies that prioritize adhering to current laws can promptly identify and address compliance gaps, mitigate potential risks, and ensure adherence to regulatory requirements throughout the M&A process and post-transaction.

Being in the business of people requires even more focus on staying compliant to industry regulations. For staffing firm owners interested in M&A, staying agile towards the ever-changing regulatory landscape of the staffing industry should be a main priority.