UK - Chief financial officers' ambitions for mergers and acquisitions are being severely impacted by pension liabilities, a new survey has found.
Almost half (47%) of FTSE350 CFOs say pension liabilities at companies they are considering buying or merging with represent “major obstacles” to successfully completing the deals, according to the survey by Towers Perrin’s HR services business.
The survey, based on responses from 70 CFOs, found CFOs and their advisers must conduct thorough due diligence in the run-up to the closing of the deals to identify and assess the potential financial liabilities in pension plans.
Failing to do so could put the financial performance of the company in jeopardy, Towers Perrin added.
Marco Boschetti, principal at Towers Perrin, said: “CFOs should be aware when they embark on M&A projects of the potential pension liability problems that could surface. Focusing solely on traditional pensions accounting due diligence can materially weaken M&A success.”
Boschetti said companies’ human resources teams should be fully included in the M&A process to consider the “potential people issues” associated with the deals.
“Human resources departments have traditionally been responsible for looking after companies’ pension programmes,” the firm said.
“But despite pensions playing such an important role in M&A deals, many HR departments remain unprepared for the new challenges ahead.”
A related Towers Perrin survey in the US found only 26% of companies believed their HR function had been “fully ready” for M&A activity.
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