04/01/2009 (Updated on October 1, 2015*)
This edition explores some of the more common issues related to employee compensation arrangements typically seen in business combinations.
How will you compensate employees of the target? The M&A Standards** may impact your decision. Determining whether employee arrangements represent compensation for service prior to and/or after the acquisition has a direct impact on the amount included as purchase price versus the amount expensed in the future. This assessment is based on whether the target or the acquirer economically benefits from the arrangement. Understanding the reasons why the parties agreed to include the arrangement in the transaction, who initiated the arrangement, and when the parties entered into the arrangement, will be important in this determination.
This edition of Mergers & Acquisitions— a snapshot explores some of the more common issues related to employee compensation arrangements typically seen in business combinations…contingent consideration, golden parachutes and stay bonuses, and exchanges of stock compensation awards. Employee compensation decisions agreed upon during deal negotiations could impact the acquirer’s future financial results.
* This snapshot, updated since its original issuance to reflect changes for, among other things, contacts and branding, contains guidance that remains relevant as of the publication date.
** Accounting Standards Codification 805 is the US standard on business combinations, Accounting Standards Codification 810 is the US standard on consolidation and noncontrolling interests (collectively the “M&A Standards”).