Mergers and acquisitions: How robust is your due diligence?
We are all aware that following a robust due diligence programme is an absolutely critical part of any deal-making process in the mergers and acquisitions (M&A) arena. It would be a foolhardy group of investors who proceed with deals without analysing every single aspect of the management buy-in, buy-out, merger or acquisition that they are about to complete.
The overriding perception of purchasers and vendors when considering an employee benefit programme and perhaps the only risk they could potentially expose themselves to is that associated with a defined benefit (DB) scheme. Experience has shown that such superficial analysis of a programme invariably leads to greater risks and significant additional unforeseen liabilities.
The potential for higher risks and greater costs is not just restricted to DB schemes, defined contribution schemes and ancillary benefits all have their potential pitfalls too. Despite this, they are often given low priority and minimal scrutiny, or overlooked completely.
Employee benefit due diligence should not be the sole preserve of the M&A arena. It makes complete business sense for all companies to regularly conduct a full audit of their existing programme.
Employee benefit due diligence seeks to identify the potential risks, liabilities and cost savings that exist within a company’s programme.
This audit is particularly effective prior to the sale of any business. Not only will the audit ensure there are no potential risks or liabilities which the buyer could use as a means of reducing price but perhaps more importantly will identify potential cost savings which could significantly increase exit value.
The Mattioli Woods perspective
Over the past 20 years, Mattioli Woods has gained extensive experience of the employee benefit due diligence process. By reviewing programmes on behalf of banks, venture capitalists, corporate finance teams, accountants and lawyers, uncovered significant potential risks and liabilities and identified substantial additional costs and real savings for their clients.
The advantages of employee benefit due diligence are clear and yet it remains an area that receives little attention. Our team has spent years forging strong links within the industry and has identified sizable cost savings, suggested cost-effective workable solutions and provided valuable cautionary advice to purchasers and vendors alike.