Case Study

Acquisition & Divestiture Due Diligence

A telecommunications firm was heavily engaged in making strategic company acquisitions and divesting divisions as economic conditions warranted. These projects ran on a short time line and usually occurred with little notice.

Our client recognized that significant liabilities from both a hard dollar standpoint and compliance standpoint could be hidden in the employee benefits plans of the companies being acquired.

The timing of the acquisitions did not allow for in-depth analysis of every acquired company’s benefit plans, so SBA developed an approach that flagged at-risk plans for more in-depth analysis. SBA and the client then discussed options for dealing with any significant plan issued uncovered. Tasks performed included:

Gathered and cataloged plan documents, plan amendments, summary plan descriptions, and summaries of material modifications
Reviewed all plan documentation to ensure regulatory compliance and identify concerning provisions
Reviewed participant communications, including fee disclosures
Reviewed 5500 filing
Reviewed non-discrimination testing
Identified all plan-associated vendors
Reviewed plan fees and associated payments
Reviewed historical plan issues and VCP filings
Reviewed corporate governance, including the investment policy statement, history of committee meetings, investment review process, and plan expenses
Identified issues with underlying investments
Analyzed record keeper compliance with plan provisions (e.g., match, loans, distributions)
Identified and reviewed any ancillary plans (e.g., non-qualified plans)
Analyzed employee retirement plans to identify hidden liabilities or administrative issues

Our client was able to accomplish a number of acquisitions with full knowledge of the issues associated with the acquired company’s retirement plans. Any compliance issues associated with the plans surfaced and were incorporated into the negotiation process.

SBA’s involvement allowed our client’s internal resources to focus on their day-to-day responsibilities while ensuring the acquired company’s plans were in regulatory compliance.