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Mergers and Acquisitions
Mergers and acquisitions
Transaction structures: road map for employee beneits diligence
Purchase agreement Type of deal Focus of insurance due diligence
Stock assuming pre-close liabilities Standalone • Evaluate current employee beneit plans and costs
Buying 100% of the company − Evaluate the portability of the plans
− Estimate go-forward costs
• If needed, quantify accruals for self-funded plans
Stock assuming pre-close liabilities Spin-off • Evaluate current beneit plans and costs/allocation
Buying a division of a company − Is entity or parent the plan sponsor?
− Parent: Estimate cost of plans for NewCo and quantify any NewCo potential liability for parent
plans post-close
− Entity: Change in control provisions?
• If needed, quantify accruals for self-funded plans
Stock assuming pre-close liabilities Roll-up • Evaluate current employee beneit plans for both entities
Merging two companies − Identify/estimate stand-alone costs
− Estimate merged program costs
• If needed, quantify accruals for self-funded plans
Asset Assuming pre-close liabilities • Ensure current employee beneit plans included in asset schedule or NewCo has access to these
plans
• Estimate costs for post-close NewCo policies (unless plans included in assets)
• If needed, quantify accruals for self-funded plans
Asset Not assuming pre-close liabilities • Identify pre-close costs for employee beneit plans
• Estimate costs for post-close NewCo plans
Never assume that just because the purchase agreement is titled “Asset Purchase Agreement,” purchaser is not liable.
The agreement must be reviewed.
IVX Health — Lockton Total Rewards Practice Overview 37 Lockton Companies
Mergers and acquisitions
Transaction structures: road map for employee beneits diligence
Purchase agreement Type of deal Focus of insurance due diligence
Stock assuming pre-close liabilities Standalone • Evaluate current employee beneit plans and costs
Buying 100% of the company − Evaluate the portability of the plans
− Estimate go-forward costs
• If needed, quantify accruals for self-funded plans
Stock assuming pre-close liabilities Spin-off • Evaluate current beneit plans and costs/allocation
Buying a division of a company − Is entity or parent the plan sponsor?
− Parent: Estimate cost of plans for NewCo and quantify any NewCo potential liability for parent
plans post-close
− Entity: Change in control provisions?
• If needed, quantify accruals for self-funded plans
Stock assuming pre-close liabilities Roll-up • Evaluate current employee beneit plans for both entities
Merging two companies − Identify/estimate stand-alone costs
− Estimate merged program costs
• If needed, quantify accruals for self-funded plans
Asset Assuming pre-close liabilities • Ensure current employee beneit plans included in asset schedule or NewCo has access to these
plans
• Estimate costs for post-close NewCo policies (unless plans included in assets)
• If needed, quantify accruals for self-funded plans
Asset Not assuming pre-close liabilities • Identify pre-close costs for employee beneit plans
• Estimate costs for post-close NewCo plans
Never assume that just because the purchase agreement is titled “Asset Purchase Agreement,” purchaser is not liable.
The agreement must be reviewed.
IVX Health — Lockton Total Rewards Practice Overview 37 Lockton Companies
