Posted June 12, 2012
Part two in a series of four discussions on benefit issues and opportunities during an M&A
Mergers and acquisitions (M&A) can be great opportunities for businesses to reduce costs and enhance profits through collaboration, synergy of services and operations, strategic alliances and increased market leverage.
When researching the viability of an M&A, do not overlook differences in employee benefits. Disparities in insurance plans and other benefit perks may become stumbling blocks or deal breakers for companies contemplating a major change in structure or ownership.
The following checklist will help company decision makers avoid potential pitfalls and ensure that employee concerns are identified and addressed:
- Analyze benefits plans – Review the details for every benefit plan written in the past five years for each company, noting advantages and disadvantages of key features; examine benefit options, including older, defined plans for tenured workers, perks and agreements—from insurance plans and vacation days to stock options—as well as travel allowances or expenses; look for consistency in the application and approval of benefits; review any modifications that are made in special circumstances or for individuals at specific employment levels
- Discuss benefits with employees – One company may offer extra perks that the other company doesn’t; before eliminating benefits, talk to employees to analyze the impact and value of the extra benefits; removing perks may create ill will and have a significant impact on employee morale, which could increase turnover or lower productivity
- Evaluate labor contracts – Understand the written contracts and agreements, especially as related to changes in benefits due to mergers or acquisitions; review employee complaints and any litigation on the horizon
- Assess contracts – Evaluate all contracts written with benefits partners and third-party administrators; examine operational and payment policies; assess the costs of continuing these plans vs. terminating the contracts and renegotiating them at lower rates for a larger group
- Select the right benefit plans – For a seamless transition of employee benefits, evaluate the benefits needs of the employee group and develop a list of critical elements for the plans; any new benefits should be close to what employees at both companies currently enjoy, as extensive discrepancies may be deal breakers
- Contract with the right insurance partner(s) – M&As can be complex, so it is important to work with insurance carriers that offer desired benefits and can redesign plans to accommodate changes in group size as the company grows; look for carriers with flexible administrative systems and plans to meet a range of employee needs
- Design a proactive communication plan – Develop a detailed communication and implementation plan to announce the news to employees; select individuals respected by employees at different levels within the company to communicate the M&A and discuss any changes in employee systems and benefits; make sure that information shared is accurate; do not make promises that may not be fulfilled; honest communication will aid in the retention of existing quality employees and the recruitment of new associates; follow up with regular communication to keep employees updated on the process
Mergers and acquisitions can provide exciting growth opportunities, but remember that potential liabilities await companies that fail to do their homework before an agreement is signed.