Mergers and Acquisitions: Employee Benefit Plan Due Diligence

Abstract

When a corporate transaction occurs, many pervasive technical, economic, plan design, and human resource issues surface in compensation and benefits. This article examines the breadth and depth of those issues. In recent years, infamous corporate scandals regarding fiduciary issues coupled with significant legislative and regulatory activity have made employee benefit plan due diligence more visible and complex when viewed through the paradigm of corporate transactions. Unfortunately, very often the buyer's due diligence teams do not focus on these employee benefit plan issues, which can be costly in terms of overstated purchase price, and the difficulty in obtaining retroactive adjustments or credits. It is important for companies to review employee benefit plans at the earliest stage of a corporate transaction. Because of the complexities of employee benefit plans, the due diligence review will bring to the surface the economic and technical impact that may affect the purchase price or administrative issues going forward.