Be Prepared for Employment- and Benefits-Related Due Diligence Requests
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During acquisition, your buyer will request detailed employment records and policies, as well as a wide range of documentation related to your employee benefits plans. These requests alone can be extremely overwhelming for deal teams, which are typically small, to handle, and there are, of course, many other due diligence categories and pieces of the deal. You can give a gift to your future deal team by organizing these documents early and starting to assemble a clean data room long before a buyer is even in the picture.
BEST PRACTICES:
Keep digital files of: Offer letters, agreements (e.g., PIIAAs), and equity grant records; Payroll and timekeeping documentation; Hiring documentation; Termination/severance records; and Employee benefits plan documents, summaries, communications, filings, and more. Be sure to document any prior employment disputes, severance agreements, or ongoing claims. Transparency in these areas helps avoid deal fatigue or last-minute surprises. Keep an updated employee census with names, job titles, compensation, and dates of employment. This provides a snapshot of your workforce to prospective acquirers. Maintain a digital folder with offer letters, employment agreements, and NDAs for all employees and key contractors. These are usually requested early in the diligence process.
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