UK -- Almost half of the chief financial officers (CFOs) of leading companies in the UK say that the pension liabilities of companies they are considering buying or merging with are serious obstacles.
In a survey of 70 CFOs from FTSE 350 companies by human resources consultant Towers Perrin HR Services, 47% said pension liabilities impeded the successful completion of their mergers and acquisitions (M&A) deals.
Marco Boschetti, principal at Towers Perrin, commented: “CFOs should be aware when they embark on M&A projects of the potential pension liability problems that could surface.
“To avoid problems later on, CFOs and their advisers must conduct thorough due diligence in the run-up to M&A deals in order to identify and assess the potential financial liabilities in pension programmes.
“Without doing this they risk spending a lot of time and money doing M&A deals, only to discover later on that the deals do little to enhance financial performance, or worse still, may damage performance.”
Boschetti said despite the important part pensions play in M&A deals, many HR departments are sidelined in the process.
“Focusing solely on traditional pensions accounting due diligence can materially weaken M&A success. Companies’ human resources teams must also be fully included in the process to consider the potential people issues associated with deals.”