EUROPE - Companies' pensions liabilities have become a plague to the private equity industry, claimed a survey commissioned by Mercer Human Resource Consulting and Marsh and Kroll.
The survey stated that private equity deals have become more complicated since the introduction of a new Pensions Regulator that forces companies to seek clearance before going ahead with any corporate deals.
Of the 100 European firms included in the survey, a fifth claimed to have pulled out of a deal because of an underfunded pension scheme.
40% of respondents said that they now offset the risk of pension schemes in deficit by adjusting the deal price, while 21% said that they used warranties and indemnities to achieve this.
Eric Warner, worldwide partner at Mercer, compared pension liabilities to "sleeping giants" and said that while they may not mean the end of a deal per se, they "will often have a major role in price discussions".
He advised private equity firms to "carry out robust due diligence" before entering into negotiations.
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