HR Due Diligence and Purchase Agreement
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Which items of a HR Due Diligence are most relevant for the Purchase Agreement in your experience? Are there maybe some items which are common to be critical for the merger and thereby important for the purchase agreement?
In my vision, the most important thing is the understanding of the actual culture of the company. Which should then be reflected with the different financial commitments and HR variations during the past years.
I think that compliance to HR requirements is most important since you’re talking about the items that affect the purchase agreement. If there are any issues with the hiring process and documentation, you’ll want reps & warranties to address this and protect the buyer.
Based on my experience in internal audit for HR process, the following areas might be important when we are performing HR DD: employee headcount, employee contracts, benefits and compensation, labour law compliance, policies and procedures, and retention and attraction strategies. Importance in the purchase agreement relatively depends on the specific circumstances of the M&A. As we all know each M&A activities has their own objective and no 2 M&A may be the same.
I think it is important to always check on the core business team when doing HR DD. How will the merger affect the core business units and would there be good synergy in the 2 companies?
This is a great question and the responses in this thread have been very insightful. I specifically agree with three items; compliance to HR, culture, and synergies between core business units. From my experience, if there is not an understanding that compliance to the new companies HR policies and procedures will be expected, this will cause a lot of unneeded tension and dispute after the acquisition takes place. Culture is of course important to understand current state and build a plan on how they will merge. Lastly, I think it is really important to look at core business functions and proactively think how they will merge as I often see this as a point of tension and disruption following an acquisition.
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