HR and pensions M&A

Creating clarity for buyers and sellers around people and pensions issues, enabling them to manage risks and potential costs with confidence.

About us

Building on our Big Four heritage, our practitioners have near unparalleled experience. We advise on over 50 transaction projects every year.

We treat each transaction individually, considering their unique set of circumstances and listening to our client’s priorities. The team offers a bespoke, data-driven approach to HR due diligence with an emphasis on the financial implications. And our pensions due diligence addresses some of the largest liabilities and most complex issues. Our M&A team is devoted exclusively to pensions and HR, ensuring these crucial aspects remain a strategic priority, rather than something that comes to light later in the process – potentially at substantial extra cost.

Highly experienced team of M&A practitioners with a Big Four heritage

Hands-on knowledge advising 50+ corporate transactions each year

Dedicated insight on HR, pensions and benefits

Expert in dealing with the most complex of pension issues

Targeted, data-driven approach to HR due diligence

Support with post-signing services, such as trustee negotiations

Setting up every transaction for success

Defined benefit pension plans can be among the largest items on a company’s balance sheet. And the most volatile.

Our experienced M&A practitioners have advised on hundreds of transactions involving UK DB pension plans, including those with some of the largest liabilities and most complex issues. We help buyers understand the likely future costs of sponsoring a plan, as well as how to effectively engage with trustees and minimise regulatory risk.

We know that broader people issues also have a significant impact on the overall success of a transaction. Our HR diligence services get you ready to address the key issues right from the outset – whether that relates to transaction-related payments, employee retention, benefit harmonisation or any other HR issue.

Providing pensions diligence

We assess and quantify the key financial and regulatory risks posed by pension arrangements. Then we set out strategies to minimise or mitigate them.

Some of the main diligence areas can include:

Net Debt and Quality of Earnings analysis
Employer covenant impact
Commercial negotiations, such as over SPA detail or pricing
Trustee (and Regulator) engagement

Covering your HR diligence needs

Each transaction comes with different HR and benefit challenges. This is why we conduct interviews with target HR directors and executives, to get to the crux of the HR issues. We’ll also work with you to understand your priorities and vary our focus accordingly.

Our comprehensive approach involves: quantitative analysis of benefits; transaction-related payments to employees; and employee data. All this sits alongside our qualitative analysis of organisational design and other HR issues, and is supported by commentary on market and industry norms.

We can also partner with business separation teams to manage stand-up of HR systems, policies, benefits and associated administration, prior to the transaction completing.

Get in touch

Let us help you get on top of your pensions and HR challenges.

+44 (20) 7123 6000 Contact us

FAQs

Yes. The future costs of a UK DB plan are driven by funding regulations (or, if the plan is unfunded, by benefit payments). These are often more prudent than the balance sheet position, and can produce highly volatile funding levels. Buyers should seek to ensure these costs are reflected in the business valuation, potentially alongside an allowance to reflect the downside risks.

In the UK, DB plans are run by a Trustee board, which determines the funding valuation assumptions, investment strategy, and other plan decisions – generally in agreement or consultation with the employer. The employer will want to maintain a good relationship with the Trustees to avoid potentially costly disagreements over the funding approach or other issues. Buyers often need to agree specific measures, such as upfront contributions or restrictive dividend policies, with Trustee boards, in order to secure their consent to a transaction. Without this a buyer will be at much greater risk of intervention by the Pensions Regulator, which has the power to require additional pension contributions and even to launch criminal prosecutions against individual executives.

Where transactions fail to achieve the forecasted synergies (or worse, destroy value) it’s as often through failures of execution – many of which can be people related. HR due diligence highlights issues which might that need to be dealt with following the transaction, such as potential leadership team concerns, new benefit plans to be established, high employee turnover, low engagement. It helps ensure the buyer is ready to meet these challenges on day one and can avoid HR missteps that lead to value leakage.

Legal HR due diligence tends to focus on employment contract reviews and identifying any employee litigation claims. It does not generally cover the same broad picture of the business from a people perspective, or quantify the financial implications of reward and benefit issues.

HR due diligence can be bespoke to the nature of the target and the buyer’s plans for it. A share sale will differ markedly from carve out; an integration will differ from creating a standalone business. It’s often helpful to first carry out a ’red flags‘ phase of work to determine areas of interest, before completing a more in-depth analysis. For example, this might highlight unusually high turnover levels for a particular geography, or an unusual level of temporary staff being used compared to others in the industry.

A typically HR DD project might consider the following; Organisation Design and Culture – organisational structure, employee data analysis, retention plans and turnover, employee engagement, unions and CBAs; Leadership – key employees and open positions, contracts, remuneration, change in control payments; Reward and benefits – salaries, pension plans, bonuses, share plans benefits, wage inflation. In addition, we would address any specific issues highlighted by the seller, or areas of focus of the buyer.

HR due diligence can be based on publicly available and generic data room information. The latter will often include HR policies and employment contracts. Of course, for the best insights, we would want to have a detailed discussion with the target’s HR Director, and carry out quantitative analysis of anonymised employee data including role, grade, location, service, and compensation.

Isio can provide management of stand-up of HR systems, policies, benefits and associated administration, prior to the completion of the transaction. Partnering with separation teams, we pull together all functional areas and third-party providers to drive through the buyer’s vision for the post-transaction approach. Post-completion, we can assist in the same way with the integration of the desired HR and benefits structures.

Key people

Paul Geeson

Partner

Ian Elphick

Director

See full profile

Our people