Due Diligence Checklist

Each country involved in a Merger or Acquisition needs to be thoroughly analyzed for the short and long term financial & operational impact on the Acquisition Price, Contract Wording, and Business Strategy post-Acquisition.  Since the Company and Employee Relationship is key to a successful M&A effort, we use the following checklist of areas covering HR, Rewards, Compensation, Retirement, Termination, and Benefit issues.

Note for all areas: Appropriate documentation will be collected during the Due Diligence process.

LABOR RELATIONS

• Employment Contract changes OR Benefits Changes triggered by sale of Company (e.g. tin parachutes, Change in Control)

• Automatic contract terminations on sale of Company

• Employment contracts on all executives

• Employment contracts on all Executives

• Labor and collective bargaining agreements

• Pending lawsuits regarding employee benefits and/or union/labor agreement

• Union/labor agreements covering compensation, benefits, and severance

• Participation of Works Council (Local, Regional, Country)

• Pending complaints or actions by outside organizations on employees (e.g. government agencies, unions, etc.)

FINANCIAL INFORMATION

• Detailed Payroll Data

• Pending/Promised Compensation Increases

• Pending/Promised Stock Options & History of provision(s)

• Last 2 or 3 Actuarial Valuations (local, tax & accounting) for each retirement and separation plan showing all liabilities (current and projected) and all assets (internal & external at book, market or adjusted actuarial value)

• Last Contribution made and expenses charged for each retirement/severance plan

• Last Premium statements for all insurance coverages as well as claims experience

BENEFITS

• If no programs exist, describe what is practice when an event (retirement, severance, etc.) happens?

• Retirement plans (Defined Benefit, Defined Contribution, Profit Sharing, etc.) including Plan Documentation (Full Documents with any current & proposed amendments, trust deeds, insurance contracts, etc.)

• Statutory or Company provided severance paid on leaving service regardless of the reason (e.g voluntary, involuntary, death & retirement)

• Stock option and/or purchase type programs

• Savings plans – private or mandated

• Retiree – Life, Medical, etc. programs

• Welfare coverage for actives and retirees

• Life insurance on groups and individuals; actives and retirees

• Accidental Death and Service benefits

• Business travel – accident and/or medical benefits

• Medical, Dental, Vision benefits for various groups

• Disability including short and long term

• Participation of Works Council (Local, Regional, Country, European)

COMPENSATION

• Compensation policy and/or philosophy

• Deferred Compensation Program documentation

• Performance Management process

• Job structure (e.g. salary system, banding, published hierarchy)

• Short and long-term incentive plans

• Commission based or other type plans

• Frequency of pay

• Date of next Pay change

• Cost of living and merit increase policies – mandated or private

SOCIAL AND MANDATORY ISSUES

• Notice periods

• Loans

• Company cars

• Travel assistance

• Sick Leave Policy

• Workers Compensation Program

• Long Term Policy

• Legal Assistance Program

• Relocation arrangements

• Employee Assistance Programs

• Auto and Home Insurance

• Club Memberships

• Company Credit Cards

• Luncheon Vouchers/eating facilities

• Vacation and Holiday Policies

• Education Assistance

• Financial Planning Service

• Additional Paid Allowances – private or mandated (e.g., luncheon vouchers, education, housing, etc.)

• Vacation, Public Holiday, PTO Policies

• Working Hours

• Overtime Pay and classification

• Compassionate, Funeral, Bereavement Leave

• Maternity / Paternity Leave and allowances

COMMUNICATION

• Covering all Plans, Programs & Practices Regarding

• Remuneration Issues

• Group Materials/Handouts on Compensation, Benefits, etc.

• Individual letter Agreements and Benefit Statements

INTERNATIONAL PROGRAMS

• Business Travel Insurance (Accident, Medical and/or Assist)

• Multinational Insurance Pooling (Last 2 reports, dividend distribution, etc.)

• Global or local accounting valuations of DB retirement plans

• Any Expatriate to or from the US – Benefits and Contracts

• Any Assignee and/or Third Country National (TCN) programs

• Global or Domestic relocation policies

CRITICAL HUMAN RESOURCE ISSUES

Please provide a list of critical issues in terms of human resource policies, conditions of employment, or compensation and benefits programs that need to be addressed during the next 3 years.

• ALL Benefit, Compensation & HR Policies – Identify any pending and/or promised changes.

• NOTE for Initial Letter of Intent and Purchase Agreements – Wording should assure that NO changes to Benefits, Compensation, or HR policies will be made without Buyer’s consent.

• HR Policies – Identify all areas where practice varies from policies.