Due Diligence: Human Resources, Management and Employees

Performing a thorough due diligence on a potential acquisition is one of the most important tasks that a buyer needs to do when making a purchase decision.  We’ve put together a list of items that buyers will want to investigate when talking to a seller.

This is part of a large series. Be sure to scan our Buyers Blog for the category Due Diligence.

Now we’re moving on into evaluating the Human Resources of your potential acquisition portion of your Due Diligence tasks. The purpose of this section is to understand the Management and Employees that you’ll be obtaining.

A. Management and Employees

– Obtain a list of all employees, their current and prior year compensation, date of hire, date of birth, race, sex, and job titles.

– Obtain copies of any employment agreements.

– Obtain copies of performance evaluation criteria and bonus plans.

– Obtain copies of any non-compete, intellectual property, and/or confidentiality agreements. Also obtain copies of non-compete agreements that currently apply to terminated employees.

– Obtain copies of any salesperson compensation agreements.

– Determine the number of states to which payroll taxes must be paid.

– Obtain a copy of the employee manual.

– What has been the employee turnover rate for the past two years?

– Obtain summary of current employee benefits

– Review pension plan documents

– Obtain list of all former employees using COBRA coverage

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