Sherrie Suski, Chief Administrative Officer and Vice President of Human Resources at BlueCava, goes over mergers and acquisitions within HR.

1. Mergers and Acquisitions
Considerations for Human Resources

2. Types of Acquisitions
 Stock Sale
 A stock sale is when your Company is acquiring all assets and liabilities of another
company.
 In a Stock Purchase, all of the outstanding shares of stock of the business are
transferred from the seller to the buyer. The buyer in effect steps into the shoes of
the seller, and the operation of the business continues in an uninterrupted manner.
 Unless specifically agreed to, the seller has no continuing interest in, or obligation
with respect to, the assets, liabilities or operations of the business.

3. Types of Acquisitions
 Asset Sale
 In an Asset Sale, the seller retains ownership of the shares of stock of the business.
 The buyer must either create a new entity or use another existing entity for the
transaction.
 Only assets and liabilities which are specifically identified in the purchase
agreement are transferred to the buyer.
 All of the other assets and liabilities remain with the existing business and thereby
the seller.

4. Organizational Structure
 Build out your organizational structure of the combined entities as soon as
possible.
 This will act as your guidelines for interviewing and assessing employees for future
roles. The prospective employees, as well as your existing employees, will be
anxious to know about any changes in the organization, their positions, location of
their work and/or the reporting structure.
 You also need to have your people, particularly the top-level of the new
organization, in place quickly.
 Frequent and early communication from leadership will reduce anxiety on both
sides.

5. Policies and Procedures
 In both situations you will need to figure out what the company being
acquired has in place for their policies and procedures and how they align
with those that you have in place.
 Frequently there can be a meeting of the minds where you can take the best
of both worlds and adopt new P&P’s.
 Especially, understanding the differences in both leave policies and having a
transition plan before the close date is critical to reducing employee
disruption and managing expectations.

6. Benefits
 In most cases, when it is an asset sale, you will be able to choose which
liabilities to exclude from the sale,
 such as the 401(k) plan provided by the seller.
 In a stock sale, you will be required to assume all the benefit plans, at least
for a period of time, and may not exclude any up front.

7. Health Insurance
 One of the first considerations is whether the combined entity will be over
100 employees if neither entity was previously. Consider…..
 The employer mandate,
 minimum essential coverage and
 new reporting rules need to be explained to the larger combined entity

8. Flexible Savings Accounts
 Because these are funded by employees’ deferred salaries, these accounts are
subject to IRS guidelines, which state a sale of a business is NOT a qualifying
change.
 In a stock sale, where both assets and liabilities are acquired, the buyer will
just need to assess funding status of the accounts compared with the claims
paid.
 For an asset sale, where only certain assets are purchased, coverage for
employees can remain with seller’s FSA through the end of the year. The
buyer transfers the employees’ salary deferrals to the seller’s plan to pay for
the claims. Or, coverage is transferred to the buyer’s plan and they now
handle the employee’s account balances and claims.

9. 401(k) Plans
 In a stock sale, unless the acquiree plan is terminated prior to the
transaction, the acquirer would become the sponsor of the retirement plan
once the transaction is finalized.
 Careful consideration must be made to the contribution liability of the acquiree
plan prior to assuming sponsorship. Particularly in the event of a Defined Benefit
Pension plan, the cost to maintain could be significant. Retiree health benefit
options could be a huge cost as well.

10. Final Considerations
 While it is not possible to think of everything, the more you can handle prior
to the acquisition, the more smoothly the integration will go afterwards.
Both from a plan, as well as from an employee, perspective.