Human Capital M&A Transaction Services
No stone unturned
With employee-related expenses among the largest line items on a corporate financial statement, it may seem reasonable to expect an acquisition target to quickly produce basic human resources (HR) information, like an inventory of their benefit programs or an accurate headcount. But assumptions like this can trip-up an inexperienced due diligence team. With incomplete information and tight deadlines, how do you increase the odds that you’ll find hidden costs and liabilities that could shift the transaction’s value by millions of dollars?
Deloitte advises strategic corporate buyers and private equity investors throughout the entire M&A deal life cycle. Our consulting, audit, tax and financial advisory professionals – including approximately 3,000 human capital M&A specialists – have supported some of the most complex global integrations and divestitures in business history. Learn more about the offering.
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Meet our people
- HC M&A restructuring and organization design
- HR integration and divestiture
- Employer health services
- Organization strategy and design
- Talent strategies
- Compensation strategies
- HR outsourcing
- HR transformation strategy and planning
- Benefits administration and operations
Learn more about the offering
Know where risk and opportunity hide
Few HR professionals have the specialized knowledge needed to uncover all the people-related financial risks, which can range from unfunded pension plans to potential class action lawsuits. And even when they do have the knowledge, HR is on the hook in other areas such as defining employment terms for the target’s leadership team, structuring employee retention and severance packages, redesigning the organization structure and more. That makes human capital due diligence an intense, short-term requirement – one that can shape the organization’s future, for better or worse.
How we can help
Deloitte advises strategic corporate buyers and private equity investors throughout the entire M&A deal life cycle. Our consulting, audit, tax and financial advisory professionals – including approximately 3,000 human capital M&A specialists – have supported some of the most complex global integrations and divestitures in business history. We work with our clients during the early deal stages to identify and assess people-related risks and opportunities including:
- Compensation, benefits and insurance liabilities
- Change of control exposure
- Exposure to employee-related compliance liabilities
- HR operations synergy opportunities and risks
- Culture risks
- Potential synergy savings
- Retention of key employees
- Protection of trade secrets and intellectual capital
Our Human Capital M&A Transaction Services professionals help organizations:
- Uncover and mitigate employee-related financial, compliance and operational risks
- Identify employee-related cost-savings and synergies
- Determine cultural, structural and talent risks
- Develop preliminary plans for HR functional integration, including policies, processes, programs and roles.
Four ways to get more value now
Build your toolbox. If your organization’s growth strategy calls for M&A activity, get a head start on HR due diligence by creating a process that will allow you to compare and contrast a target’s workforce with your own.
Get into the deal room early. In addition to financial and legal risks, the deal team should also consider the risks and costs associated with combining two organizational structures, retaining valuable talent and merging diverse cultures. And that takes being at the table when decisions are being made – not after the fact.
Be a team player. The human capital diligence team must work side by side with the accounting, tax, finance and legal diligence teams. Look to the financial and accounting folks for valuable information that HR may not have access to, such as detailed trial balances and cash flow statements, which include employee-related expense items. Some legal and tax issues may also overlap with HR, so it’s important to work together to identify and value interdependencies.
Be prepared for uncertainty. The due diligence process is usually intense, requiring flexibility, stamina and attention to detail. Be prepared to make decisions with incomplete data, using sound judgment to fill in the gaps. But don’t forget to clearly document which information was not available, along with any assumptions you have made.
Human Capital M&A Transaction Services in action
- A large international cosmetics retailer seeking to acquire another cosmetics company needed to conduct due diligence in the areas of finance, accounting, tax, human capital and information technology. As part of our human capital due diligence, we helped this client identify critical key employees and estimate the additional costs of retaining them. Our findings were used to negotiate a reduction in the purchase price, creating significant savings for our client.
- A global private equity investor looked to us for advice related to an acquisition of a carve-out that had a US-based unionized workforce. We helped our client to develop a strategy for assuming employee benefit and insurance programs and identified compliance issues that would need to be corrected.
- Our client looked to Deloitte for support in merging two organizations with union and non-union workforces, as well as helping them transition from public to private ownership. We helped the company understand differences between the two organizations' benefit programs and the costs that would be associated with a merger. We also helped them develop a compensation and benefits integration strategy that would generate cost synergies while maintaining employee satisfaction.
As used in this document, “Deloitte” means Deloitte Consulting LLP, a subsidiary of Deloitte LLP. Please see www.deloitte.com/us/about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries.