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Due Diligence and HR in M&A Transactions

05 13 2021

Inorganic growth via acquisition has become a proven way for companies to quickly scale and grow. Often, the company being acquired is a competitor with a proven record of success, revenue, and employee retention. The merger and acquisition (M&A) also may be due to a company wanting to consolidate or enter a new market.

Whatever the reason for the M&A, careful planning is crucial for seamless execution and keeping revenues and key employees intact. That’s where a PEO can help. PEOs can assist in developing an intricate plan that encompasses human resources, payroll and management compensation, and the culture of each company as they become one. But these essential items aren’t the only thing a PEO can do for your asset management firm, RIA, or alternative investment fund—they can also vet acquisitions that your company is considering. Here are a few key areas PEOs examine:

  • Company leadership
  • Human capital issues
  • Compliance and legal risks
  • Employee benefits
  • Retirement planning
  • Job titles and reporting hierarchy
  • Payroll, employee benefits, retirement plans, and time off
  • Contracts and agreements
  • Recruiting

Pre-M&A execution requires due diligence to ensure a smooth transition, especially for employees. According to Harvard Business Review, 

M&A is a mug’s game, in which typically 70%–90% of acquisitions are abysmal failures. Why is that so? The answer is surprisingly simple: Companies that focus on what they are going to get from an acquisition are less likely to succeed than those that focus on what they have to give.” –M&A: The One Thing You Need to Get Right.

To achieve a successful aquisition, PEOs help ensure that all the boxes checked for outstanding benefits combined with a healthy company to eliminate the ‘people issues’ that can occur during transition. Our team of skilled professionals is a resource for any financial services company considering an M&A and in need of guidance throughout the entire execution. It’s not a guarantee that all employees will remain, but your company can avoid many issues by providing excellent communication to employees and through careful transition planning.

 At AspenHR we provide HR Managed Services via our PEO and ASO solutions to alternative investment funds and financial services firms. Our white-glove service model enables our clients to truly focus on their core business while becoming best-in-class employers. Our specific services include HR compliance and consulting, employee benefits (medical dental, vision, life, disability, 401(k), and payroll administration.