Buying a company involves more than analyzing the financial and legal aspects. A crucial component is the human resources (HR) due diligence review. This essential step provides a comprehensive and strategic overview of the talent, culture, and employee-related risks. It guarantees a smooth acquisition and ensures optimal HR management after the transaction.
More Than Just a Cost Analysis
HR due diligence goes far beyond simply adjusting salary costs for inflation. It is an in-depth analysis that can reveal major strategic issues and hidden risks, as well as significant opportunities. The aim is to assess the strength of the target company’s human capital, and then to secure integration while optimizing costs and organizational processes.
A Strategic and Global Vision
HR due diligence provides a strategic perspective to maximize long-term performance. It evaluates key dimensions such as:
- Organizational values and culture: Analysis of organizational culture, work climate, and employee commitment to assess post-acquisition risk.
- Company demographics: Analysis and projection of retirement projections, succession planning, and training needs, etc.
- Occupational health and safety: Analysis of current and future absences, accident risks and associated financial impacts, to propose a model that both guarantees compliance with standards and reduces associated expenditure.
- Financial aspects of HR: Analysis of direct compensation (salaries) and indirect compensation (bonuses, shares, etc.), as well as employee benefits (group insurance, pension plans, etc.).
A Concrete Example
The analysis of key managers is also essential: by assessing their leadership, their influence on corporate culture, and their fit with the acquirer’s strategic vision, it becomes possible to better anticipate the impact of potential departures or leadership conflicts, thus ensuring a successful integration.
Let’s take the case of a 200-employee company acquiring a 100-employee competitor. Thanks to the HR due diligence review, several issues were identified, making it possible to negotiate the terms of the acquisition and adjust risk management strategies:
- Poorly identified critical positions: Some key functions were not automated, increasing operational risks. This observation enabled us to plan actions to minimize these risks in the future.
- Lack of succession plan: Key employees were approaching retirement without a clear succession plan. A skills transfer plan was implemented, including training, mentoring and documentation of essential processes.
- Hidden costs not to be ignored: A benefits analysis revealed that costs represented only 5% of payroll. While this seemed advantageous at first glance, a major risk was identified: the group insurance underwriting guarantee would expire within a year of the transaction, and a cost increase of $200,000 was to be expected. A $150,000 increase in CNESST contributions was also anticipated. In all, the due diligence revealed nearly $350,000 in unbudgeted costs. This enabled the buyer to negotiate the sale price accordingly.
Lussier’s Experts Support in HR Due Diligence review
Lussier’s specialists provide expertise throughout the acquisition process, offering strategic support before and after the transaction.
Before: We plan, collect and analyze HR data, identifying risks, opportunities, and optimization levers. Our detailed reports facilitate informed decision-making without slowing down the purchasing process.
After: We support talent integration, HR practice alignment, and organizational risk management. This ensures a smooth transition and strengthens the company’s resilience post-acquisition.
Lussier’s experts are on-hand to help you secure every stage of your acquisition with comprehensive HR analysis and strategic support. Contact us today for a customized analysis tailored to your specific needs.
