To our readers: "Big Deals" columnist Michael Collins and his panelists at the ProSales 100 Conference's M&A session got so many questions that they didn't have time to answer all of them. So we've launched a new periodic column, "Ask Big Deals," in which Mike will begin by answering some of those questions. Do you have a query of your own for Mike? Write to him at [email protected].
Q: What happens when the company being sold has better benefits than the acquiring company has?
A: Given the competitive job market, most companies have stepped up to the plate and offer an attractive suite of health insurance, retirement plans, vacation, and other benefits.
That being said, the complexity of benefits programs guarantees that there will be some differences in total costs, coverage, and employee out-of-pocket contributions. When differences exist, the agreed-upon outcome typically will be a function of how fully integrated the companies will become post-transaction and whether they’ll be merged into a single entity.
If they’ll be fully combined, the acquired company’s employees will become employees of the buyer and will receive the identical benefits package. If the businesses will be kept distinct and separate, it’s possible the two different benefits packages can be maintained. Selling owners who feel strongly about a potential change in benefits to their employees may be able to negotiate a multiyear changeover from, for example, fully paid benefits to employees paying a portion of their costs.
As with any point of negotiation, the greater the buyer’s desire to own the particular business being acquired, the more likely the seller will be successful in negotiating such concessions.
Despite challenges like these, we can’t imagine a set of circumstances where benefits differentials alone would derail an otherwise attractive acquisition.
