Over the past 23 years of advising Aerospace & Defense middle-market sellers, we often hear buyers ask during due diligence “what is your employee benefits package, and more specifically the cost of your health plan and employee contributions?”. This Deal Note® focuses on buyer due diligence regarding health plans, with other employee benefits topics to follow in future editions.
Health plan due diligence varies by buyer, but most buyers (whether strategic or financial), conduct extensive health plan reviews for two key reasons:
- Liability Concerns: To identify disputes, gaps in coverage, or liabilities, in an effort to avoid unexpected costs, post-closing.
- Plan Transition and Employee Impact: To assess whether to maintain the existing plan or transition to a new one, while minimizing disruptions for employees.
While health plans typically don’t have a material impact on valuation, they can have a significant impact on the due diligence process, most notably by causing substantial delays. To avoid these delays, we encourage you to ensure that your team (employee HR staff and insurance agents) is informed of the sale process long before you enter buyer due diligence, so they can prepare all necessary files, reports, and contracts in advance. Being well prepared for health plan due diligence can save substantial time during the sale process.
Have a Great Day Everyone,
Ryan Kirby
Junior Partner
