Executive Compensation and Benefits in M&A Transactions: Foundational Frameworks

This CLE course will examine executive compensation and benefit plan considerations that will impact transaction-related liabilities, target values, and the long-term viability of an M&A deal. The panel will review benefits and executive compensation frameworks, highlighting where M&A risk and valuation complications most often arise, and strategies to help avoid pre- and post-closing issues.

Employee benefits and executive compensation issues can significantly impact deal valuation and the success of an M&A transaction. Deal participants and their counsel need a foundational understanding of benefits and compensation structures/offerings, as well as compliance considerations, to identify deal vulnerabilities during diligence efforts. This understanding will improve deal negotiation and PSA drafting efforts, foster better post-closing integration, and reduce unexpected talent departures. 

Business and revenue drivers often become the focal point of due diligence efforts, leaving employee benefit plans and executive compensation considerations as a secondary thought. Since talent is a key component of any M&A deal, turning a blind eye to executive compensation and employee benefit plan vulnerabilities can be a fatal M&A transaction mistake.

In equity acquisitions—including mergers—executive compensation and employee benefit-related obligations and liabilities may transfer to the buyer. Even in deals structured as a sale of assets, a buyer may still face successor liability. As a result, it is vital to conduct a thorough investigation of the target company's executive compensation and employee benefit plans, agreements and arrangements prior to the acquisition to avoid potentially serious legal and financial consequences. Most importantly, what is discovered must then be accounted for in valuation efforts and used to mitigate risk through more informed agreement drafting.

Important deal considerations include required seller disclosures related to employee benefit and compensation offerings in effect; known compliance risks (for continued offerings and terminated ones); and analysis of which compensation and plan liabilities are continuing beyond closing. Deals should also contemplate and plan for benefit and compensation incentives for key talent tied to transaction success.

Listen as our authoritative panel provides foundational frameworks for employee benefits and executive compensation that practitioners can use to structure more successful M&A deals. Our faculty will help attendees spotlight the myriad issues that can go unnoticed during due diligence and beyond, helping dealer participants deliver more successful transactions and smoother post-closing integrations.