ML BeneBits

When private equity investment transactions close, management and private equity investors are off to the races—generally aligned on strategic and financial objectives. However, as market conditions and the economic climate shift, key parties may become misaligned and management incentive plans (MIPs) could become underwater or ineffective.

The letter of intent has been executed. The due diligence is done. The purchase agreement is signed. The money has been wired. The deal has closed. You’re done—back to business as usual! Think again. For the folks responsible for employee benefits matters, whether it be the CEO, CFO, comptroller, or human resources team, the real work after a merger or acquisition may be just beginning.

One of the most common questions we receive from buy-side clients in mergers and acquisitions (M&A) is how to handle the 401(k) plan of the target company in the context of a stock purchase acquisition: Should they require the target to terminate the 401(k) plan prior to closing? Or should they keep the 401(k) plan in place for a short period of time following closing and then merge it into their own existing 401(k) plan?