 |
Mergers & Acquisitions
Overview
Employee benefits are a complex matter in a leveraged buyout (LBO) or acquisition situation. It is imperative to review and evaluate the entire program, find any hidden problems, and decide on a strategy for solving the cost and balance sheet impact - usually all within a short period of time.
For an LBO or acquisition to run smoothly, issues of significant financial impact must be addressed. Improper analysis can lead to improper recommendations. In such cases, a qualified employee benefit consultant can make the difference between a smooth transition and a failure.
Possible Pitfalls
Areas of particular concern include: unfunded (or unbooked) post-retirement medical or life insurance liabilities and cost projections designed to minimize cost and hidden pension liabilities. These hidden pension liabilities are often associated with future liabilities, resulting from future pay or benefit increases applicable to prior services. Because of the huge financial impact, it is important that the acquiring company utilize specialists who do not represent the selling organization. In our experience, this is evidenced, when an ill-prepared specialist, working for the buyer, has undervalued liabilities by at least 50 percent, or an error of $137 million on a deal totaling approximately $500 million.
Employee Communication
Corporate restructuring is an emotional issue; therefore, after completion of the deal, the announcement to employees is of tremendous importance. It is essential to assure employees of continuity of benefits, i.e., benefits today are the same as they were yesterday. Plain language presentations by senior management are extremely effective. Components of such communication include: letters, newsletters and presentations to groups of employers.
To learn more about the issues related to M&A download a complete copy of our White Paper on Employee Benefits and Buyouts.
|
|
