Employment and Benefit Plan Issues in M&A: Due Diligence Checklist, Transaction Strategies, Risk Mitigation
Course Details
- smart_display Format
On-Demand
- signal_cellular_alt Difficulty Level
Intermediate
- work Practice Area
Commercial Law
- event Date
Wednesday, March 20, 2024
- schedule Time
1:00 p.m. ET./10:00 a.m. PT
- timer Program Length
90 minutes
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This 90-minute webinar is eligible in most states for 1.5 CLE credits.
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This CLE webinar will provide an overview of the employment and benefit plan considerations in M&A transactions that can implicate financial liabilities and impact the value and long-term viability of a business. The panel will address how to uncover employment, benefit, and compensation-related liabilities and avoid common mistakes in integration planning to ensure smooth business operations on day one and beyond.
Mr. Doron focuses his practice on the labor and employment aspects of M&A transactions, both on the buy-side and sell-side. He has advised private equity clients, as well as strategic acquirers, in hundreds of transactions. Mr. Doron helps clients to formulate strategies to structure and integrate workforces in ways that will advance their objectives. He identifies employment-related risks, helps clients assess the materiality of the exposure, and works with them to mitigate the impact. Further, Mr. Doron is highly experienced in assisting clients to navigate the complex and sensitive employment issues that may arise during or after a transaction. Post-closing, he frequently works with private equity portfolio companies to implement “best practices,” often with an eye toward positioning the company for an eventual exit. The industries in which Mr. Doron has assisted clients with significant transactions include healthcare, manufacturing, technology and software, professional services, biotech and life sciences, veterinary care, food, fitness, travel and hospitality, automotive, transportation and logistics, education, waste management, infrastructure, utilities, energy, insurance and real estate.
Mr. Gelfand focuses his practice on advising public and private companies, and private equity clients, in financial and strategic merger and acquisition transactions and executive compensation matters, as well as assisting asset management clients with the structuring, implementation, and administration of carried interest and “phantom” carried interest programs. He advises clients on the compensation, benefits, and employment-related aspects of domestic and international merger, acquisition, and finance transactions for companies and private equity clients. Mr. Gelfand also assists clients with the design, implementation, and administration of equity and incentive compensation plans, including carried interest and “phantom” carried interest plans, the negotiation of executive employment, severance, and other compensation arrangements, and public disclosures relating to executive compensation
When negotiating M&A transactions, parties often focus on the business and revenue drivers of the target during the due diligence process and leave labor, executive compensation, and employee benefit plan considerations as a secondary thought. However, employees are often the backbone of a business and employment, executive compensation, and employee benefit plan issues can be material and, in some cases, fatal issues in M&A transactions because of countless matters that may arise during the lifecycle of a deal and after the transaction.
In equity acquisitions (including mergers), the target company's legacy employment, executive compensation, and employee-benefit-related obligations and liabilities will transfer to the buyer by operation of law. Even if the deal is structured as a sale of assets, it is possible for the buyer to be held liable in many cases as a successor employer if there is substantial continuity between the buyer and seller entities. As a result, it is vital to conduct a thorough investigation of the target company's employment policies and practices and pending employment claims as well as executive compensation and employee benefit plans, programs, agreements, and arrangements prior to the acquisition in order to avoid potentially serious legal and financial consequences in the future.
A buyer will want to consider the extent to which the seller's employment policies and executive compensation and employee benefit plans and arrangements will be assumed and continued for affected employees, particularly after the transaction. Some key considerations for the buyer are issues relating to change in control and severance arrangements, vesting and distribution of benefits under equity and other incentive arrangements, defined benefit pension plan exposure (including under multiemployer pension plans), IRC Section 409A and 280G exposure, and potential employment litigation.
A seller will be required to fully disclose the executive compensation and employee benefits and employment policies in effect as well as any known compliance risks. Sellers may desire to negotiate certain ongoing employment and/or benefits for its employees who will continue with the business following the closing of the transaction.
Listen as our authoritative panel discusses the myriad of potential employment law and benefit plan issues in M&A deals and provides practical advice on how to address these issues during due diligence and when negotiating the deal to ensure a positive result for your client, whether buyer or seller.
- Overview: key employment and benefit plan considerations in M&A deals
- Impact of deal structure on employees and benefits plans: asset transaction vs. stock transaction
- Potentially costly benefit plan liabilities
- Affordable Care Act compliance
- Executive compensation issues: employment and severance agreements, equity compensation, change in control and other retention bonuses, and IRC Section 409A
- Golden Parachute (IRC Section 280G)
- Exposure to liability for worker misclassification
- Collective bargaining issues
- Pay and payroll practices
- Pre-employment and hiring practice compliance: background checks, immigration, medical exams, and drug tests
- Examples of employment-related offer and acceptance provisions, representations, and covenants in purchase agreements and related documents
- Other issues and considerations
The panel will review these and other key issues:
- What are the key employment, executive compensation, and employee benefit plan considerations in M&A transactions?
- How does the M&A deal structure impact employees and benefit plans?
- What types of questions should be asked during due diligence to uncover any potential and costly issues that may impact the deal?
- What are some examples of employment-related offer and acceptance provisions, representations, and covenants to include in stock and asset purchase agreements?
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