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Lisa Hedrick, Brent Ashley, and Sarah Mikowski discuss how thoughtful preparation with regard to a prospective buyer’s employment concerns helps preserve deal value and limit post-closing liability in an article published by Industry Today on April 3, 2020.

“Buyers are particularly focused on employment issues because they have the potential to impose significant liabilities on the new owner—liabilities that can attach to the new owner of the business even in an asset sale,” explain the attorneys. Among the items a buyer may request first is a list of all employees and independent contractors with compensation and other detailed employment information. Compiling employment data early streamlines the due diligence process and sheds light on potential areas of concern. If concerns are identified, working with advisors to correct any misclassification or to explain certain classifications will be crucial to maximizing value.

Another area of focus for potential buyers may be compliance with employee benefit laws including the Employee Retirement Income Security Act of 1974 (ERISA) and the Affordable Care Act. In many instances, identification of a misstep with respect to employee benefit laws can be corrected. 

Additionally, most buyers will want to check the box with respect to employee handbooks and policies, but they also may be interested in reviewing other contractual arrangements that you have with employees.If these types of agreements are not yet in place, it may be possible to put them in place prior to a sale transaction, giving the buyer more comfort with respect to intellectual property and key employees,” said the attorneys.

A successful deal requires seller preparation. By engaging knowledgeable advisors to review compliance with key employment laws prior to beginning a sale transaction, a seller can take control and appropriate action to control the narrative with potential buyers.

For the full article, please click here.

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Heather A. Scott

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