An acquiring entity must accurately assess the advantages and disadvantages of a target company’s human capital to negotiate a good value. A thorough human capital due diligence process takes into account key talent capabilities, compensation, benefit plans, human resources (HR) policies, and more.
Milliman’s Radhika Philip and Danny Quant explore the due diligence process in their article “Human Capital Due Diligence in a Merger or Acquisition.” Their article focuses on three topics companies need to consider during the process related to key talent:
- Assessing contractual obligations
- Identifying key high-performing talent
- Designing retention and termination packages.
Bristol-Myers Squibb’s proposed acquisition of pharmaceutical company Celgene may have set the stage for biotech merger and acquisition (M&A) transactions this year. While certain aspects of M&A negotiations are secondary or tertiary aspects, they can ultimately make or break a deal.
For example, companies can encounter serious issues when acquiring a variety of unfamiliar retirement and health insurance programs. Companies typically like to delay due diligence of employee benefits to maintain the confidentiality of the impending deal and because employee benefits may be perceived as being less material to the decision about whether to proceed or not. Unfortunately, this level of discretion can be costly, as employee benefit programs can deeply affect a potential deal, sometimes to the surprise of the acquiring company.
In this article, Milliman’s William Strange offers several steps companies can implement to better manage employee benefits programs during M&A deals.
Nonqualified deferred compensation plan (NDCP) sponsors can experience challenges during a merger and acquisition (M&A) due diligence test because of Internal Revenue Code (IRC) Section 409A compliance. However, even if all the NDCPs pass this potential problem, there are still other challenges to solve before this critical examination is completed. Two such questions are “fit” related: (1) will the NDCPs still fit within the top-hat exemption post-merger; and (2) have the NDCPs Federal Insurance Contributions Act (FICA) taxes been properly applied to the benefits? In this article, Milliman’s Dominick Pizzano and White & Case’s Henrik Patel prepare NDCP sponsors to address these two important topics and alert them to any trick questions they may pose.
With merger and acquisition (M&A) momentum showing no signs of slowing down, companies should review their current nonqualified deferred compensation plans (NDCPs) to assess whether such plans can withstand the rigors of an M&A due diligence test, particularly with respect to compliance with Internal Revenue Code Section 409A. For companies in the midst of an M&A process, a careful examination and comparison of each of the respective companies’ NDCPs is recommended prior to closing the deal so that each side knows exactly what they will be getting into (as well as what they will be getting out of the NDCPs) when the change in control occurs. This article by Milliman’s Dominick Pizzano and White & Case’s Henrik Patel provides more perspective.
A Milliman client, a global information technology (IT) company, acquired an operation in Spain. Along with the acquisition came the operation’s local retirement program, with its associated assets and liabilities, including a defined benefit (DB) pension obligation.
As part of the acquisition process, an actuary—appointed by the seller—carried out an actuarial valuation of the existing local retirement liability. Not long after the acquisition, the company asked Milliman to carry out the actuarial valuations for accounting purposes, covering operations in several countries.
To read more about the work Milliman did—and to learn why expert international actuarial advice is so important for successful global M&A deals—see Dominic Clark’s article here.
Milliman recently assisted a leading provider of institutional investment products and services in determining whether to make a bid to acquire another organization. This organization provides related, but differentiated, information and analytics to institutional investment consultants, asset owners, and managers.
The acquiring firm needed information regarding the institutional investment industry and potential growth opportunities for the target’s offerings.
In this study, Jeffrey Nipp explains how Milliman helped in evaluating these opportunities and discusses the bid’s outcome.