Mergers and acquisitions are major undertakings that can help businesses expand their capabilities and access new markets. Still, businesses need to plan the entire process carefully from start to finish.
While many moving parts must be considered, one factor often overlooked is the integration of employee benefits. This is challenging for all types of businesses. However, federal contractor benefits require special consideration given their complex compliance requirements and the need to adhere to constantly changing regulations.
Here is a look at some of the most common mistakes federal contractors make regarding employee benefits during mergers and acquisitions and how a broker can help navigate their benefits needs and revisions.
Failing to Align the Two Companies’ Business Objectives and Strategies
In a merger or acquisition deal, businesses must align employee benefits with the combined entity’s business goals and its culture. After all, the purpose of a merger or acquisition is to create more value by combining two or more companies.
When there are conflicts – such as one business using a performance-based culture that tends to reward employees according to their achievements while the other business values seniority and rewards employees based on the amount of time they have worked there – it can be difficult to motivate and retain employees who have become accustomed to a different approach.
Not Performing a Thorough Assessment of the Benefit Plans, Policies, and Liabilities of the Target Company
Due diligence is an essential part of all mergers and acquisitions. It is important to ensure that the target company’s employee benefits plans do not get lost in the shuffle as leaders focus on the operational, legal, and financial aspects. While health insurance and retirement plans often receive some consideration, other benefits, such as paid time off and fringe benefits, are sometimes overlooked.
These plans affect the deal’s valuation, employee integration, and retention and must therefore be assessed carefully. If, for example, one business is acquiring another whose retirement plan is non-compliant, the buyer could face substantial penalties.
It is also essential to ensure that the new company in a merger offers benefits that are at least comparable to, if not better than, those of the previous entities, or they could face employee dissatisfaction and attrition.
Inadequate Communication With Employees About How the Merger or Acquisition Will Affect Their Benefits
Communication is essential throughout a merger and acquisition, fostering trust among employees and helping to manage expectations. This must be extended to federal contractor benefits and how the transaction is expected to affect the benefits available to employees.
Many employees may worry that their benefits could be eliminated or reduced, so it is important to be upfront and provide reassurance where appropriate. Federal contractors should also remember that poor communication with their employees could pose legal risks if they violate notice or disclosure requirements.
How Brokers Can Help You Navigate Your Benefits Needs And Revisions
A benefits broker can help federal contractors handle benefits needs and revisions throughout the merger and acquisition process. They can thoroughly analyze the benefits plans, liabilities, and policies currently being used by each company to identify areas where there may be overlap, risks, or gaps that need to be addressed.
They can also develop a benefits integration strategy that aligns with the objectives of the merger and acquisition while considering the preferences of all the employees and partners involved. Brokers can draw from their extensive experience with mergers and acquisitions to devise an approach that will make the transition as smooth as possible.
Benefits brokers know how to communicate changes to employees effectively and clearly so they understand all of the changes to their benefits and any new options they can choose from. They can give them the support and information they need for a seamless transition.
In addition, benefits brokers can negotiate with various carriers and vendors to ensure employees receive optimal coverage at the best price possible. A combined entity is often better positioned to secure group pricing on benefits as it will generally be larger than the two businesses were on their own.
However, it is important to remember that managing employee benefits during a merger and acquisition does not end once the new entity becomes official. Therefore, benefits brokers will provide ongoing monitoring and management of benefits integration and outcomes, offering advice on any challenges that arise in the future.
Work With the Experienced Federal Contractor M&A Professionals
Synchronizing benefits as part of a merger or acquisition can quickly become complicated, and working with benefits consultants is the best way to ensure a smooth transition, happy employees, and legal compliance.
The team of experienced benefits consultants at Business Benefits Group (BBG) can help you navigate your benefits needs and revisions. Contact us today to request a consultation.