Category: Due Diligence / Mergers & Acquisitions

The IRS has an Employee Plans Team Audit (EPTA) program to enforce the tax rules for employee benefit programs in large companies. According to the tax agency, one of the top ten concerns of this group of auditors is how mergers and acquisitions affect compliance with employee benefit rules. Recurring or uncorrected compliance failures can lead to tax penalties or worse — such as outright disqualification of tax-favored employee retirement and benefit programs.

It may seem odd, but as soon as you start up a business, you should begin preparing the documentation needed to sell or merge with another enterprise. It may be years down the road but the records often required in today’s M&A environment can be overwhelming. If your recordkeeping has been shoddy, it can be difficult or impossible to compile the information wanted by a potential buyer or partner.

In the global, new media economy, patent due diligence has taken on increased importance in M&A negotiations. Emerging advancements have resulted in patented technology becoming the driving force behind many transactions.

Acquiring another company and merging it with your business can be the most efficient way to grow. But many acquisitions don’t pay off and it’s often management issues — not market conditions — that get in the way.

Business succession and exit planning should ideally be done over a long period of time (unless illness or another emergency makes it necessary to address them in the short term).

Mergers are like marriages. Success depends on any number of factors, but failure may be a result of one overriding flaw. In the case of mergers, that flaw often is lack of thorough due diligence.