Does anyone have experience of buying a business with a labour union?

searcher profile

October 06, 2020

by a searcher in Pickering, ON, Canada

Buying a business with a labour union - is this something worth considering? Or, should it be completely avoided? If anyone has direct or indirect experience with respect to this, please share! Thanks.

1
10
195
Replies
10
commentor profile
Reply by an investor
from Hobart and William Smith Colleges in Dorset, VT, USA
I consider unions just another factor to deal with which is at best good and at worst fatal. In distressed asset sales you can often de-certfiy the union. I dont recall the exact details but I think the business has to fail through a legal insolvency process to do this.

In theory, unions provide trained and qualified workers but most often they just collect the money and I dont see a lot of support. Some unions will send in Lean mfg experts and really help the business, others have never heard of the concept. As Jeff Brewer mentioned above, you need to DD them for what's behind the curtain.

For summary, here are a few North American union situations I know well.
- Food Mfg places orders ever night for number of workers they need next day. They order 113 and 113 show up at 5:45am. The next day they only need 100, only 100 show up. Total pull system that relies on the union's ability (and financial incentive) to send workers. Everything about this situation is something I'd like in my own companies.
- Fabricator. Union helped us leverage the seller (bank, asset deal) and make the deal go through. They have worked with us, been a partner and we've been very fair and honest with each other.
- Industrial mill, controlled by one enormous union where we are 1/10th of 1% of their workforce and they have deep pocketed strike budget. They are aggressive, throw their weight around and put about one company per year out of business just to make an example out of them. It's just awful.
- Two companies; old tired union, old tired union reps > they unenthusiastically bought into our vision and did they best they could. Most importantly, didnt work against us.


Best of luck to you.
Jeff
commentor profile
Reply by a searcher
from Harvard University in Fort Wayne, IN, USA
Strongly recommend you avoid it unless you have significant previous experience working with unions. They will be on their best behavior during dd knowing that they will have significantly more leverage working with a novice leader / negotiator who answers to remote investors after the transition. Most search deals use a fair amount of debt. What will you do when they stop work knowing the pressure you are under to make debt payments? I’ve worked with several unions in the past and even the best of them are slow to change and will resist efforts around operational improvements and growth unless there is major upside for them (which impacts your efforts to improve margins). Find a non-union competitor and treat the employees so well they never want to unionize. It’s better for everyone.
commentor profile
+8 more replies.
Join the discussion