M&A benefits due diligence

Optimizing Foundations performs benefits due diligence for buyers in mergers and acquisitions: the pension, retiree medical, multiemployer and executive plan exposures that come with a target, measured on a settlement basis rather than the accounting basis in the financial statements, and written up as findings the deal team can turn into price, indemnities and escrow. The firm's principal has led more than 300 such reviews for private equity firms and strategic buyers in the United States and internationally.

What the review covers

• Defined benefit plans. Underfunding on a termination or annuity purchase basis, the contribution requirements over the holding period, PBGC premiums and the purchase accounting consequences under ASC 805.
• Retiree medical. Whether the promise can be amended or terminated under the plan document and past communications, and what it is worth if it cannot.
• Multiemployer plans. Withdrawal liability exposure under each deal structure, including partial withdrawals triggered by integration, and the annual estimate the target is entitled to request.
• Executive arrangements. Change in control triggers, Section 409A compliance, Section 280G exposure and rabbi trust funding.
• Qualified plan compliance. Late deposits, failed tests, missed amendments and document-to-operation gaps, with the correction cost.
• Post-closing. Controlled group testing, plan mergers and spin-offs under Section 414(l), PBGC reportable events and transition services.

What you receive

A short, quantified report that identifies each plan, states the exposure in dollars or a range, separates the items that affect price from the housekeeping and recommends how each should be handled in the agreement, with the actuarial support in an appendix for the accountants.

How the work runs

The firm works from the data room and a targeted request list, delivers findings in the deal's timeframe and remains available through negotiation and post-closing integration. The firm's article on benefits due diligence describes what a buyer inherits in a stock or asset deal.

Common questions

How fast can a review be done? A first read of the plans and a list of material exposures within a week of data room access, with the quantified report following on the deal's schedule.

Does the firm work for sellers as well? Yes. Sell-side preparation identifies the exposures a buyer will find and prices them before the buyer does.

Every deliverable described here is reviewed by a second credentialed actuary before delivery. This page is general information about the firm's services and is not advice for any specific plan.