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Why M&A Transaction Preparation
Should Include Global Human Capital Review

By July 11, 2018 February 19th, 2019 No Comments
Why M&A Transaction Preparation Should Include Global Human Capital Review

Global human capital risks are easy to overlook during sale preparation despite a global workforce structure that is getting more complex every year. For both buyers and sellers, including a global human capital review prior to an M&A transaction will help mitigate these risks.

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Global Workforce Structure Complexity is Increasing

In Deloitte’s 2018 Global Human Capital Trends survey, 50% of respondents reported a significant number of contractors in their workforces; 23% reported a significant number of freelancers, and 13% reported a significant number of gig workers.  The survey indicated that only 16% of respondents have established policies and practices to manage these alternative worker types.  In addition, only 29% of respondents said that their organizations track these alternative workers’ compliance with work contracts, and only 32% track their quality of work.  The usage of alternative labor pools is increasing quickly—which is increasing global human capital risks on a day-to-day basis and in global mergers and acquisitions transactions.  Buyers and sellers should be cognizant of these risks and perform thorough due diligence to identify potential issues.

Sale Preparation Often Overlooks Human Resources

Preparing for a sale process can take many months to orchestrate, but investors are willing to pay more for companies that perform thorough self-due diligence.  In addition, due to more robust valuations in the market today, buyers are increasingly requiring that sellers provide more due diligence materials earlier in the transaction process to justify valuations and time spent on a deal.  Sellers have typically focused on accounting and legal preparation ahead of a sale process, but as companies are increasingly operating on a global scale, sale preparation should include global human resources and human capital assessment.

Seller Considerations 

Assess the human capital footprint and structure while planning for a sale process.  Local legal regulations are constantly changing around the world, so organizations should monitor usage of contractors, freelancers, and gig workers.  Local nationals who are employed on a permanent basis will also need ongoing benefits coverage following a transaction if there is a carveout.

If planning a carveout, companies should present a fully standalone and compliant solution to potential buyers using an International PEO solution.  This will provide buyers an accurate picture of day one costs and operations post-carveout, increasing the credibility of the careveout financials and ensuring a smooth month one payroll.

Buyer Considerations

Work with high-quality solutions providers to assess the global workforce of the target company.  Contractor analyses can be performed during the due diligence process to identify areas of potential risk and also to identify solutions.

Guidance Through Mergers and Acquisitions Transactions 

Velocity Global provides a full suite of solutions to assist throughout the M&A transaction process, including consulting, International PEO, global benefits, immigration, and legal entity support. Get in touch with us today to learn how we can assist with your global expansion.