Why do due diligence reports deal with personnel and employment issues?
When a company or part of it is sold, a due diligence report is typically made on the o0bject of the transaction. The seller must be able to tell the potential buyer about the financial situation of the company and the essential facts affecting the operation. Personnel issues are at the heart of many schemes, as personnel are often the key source of skills and expertise for the business as well as being a significant cost.
The buyer is also interested in employment matters because employment relationships may involve financially significant risks that will only materialize years later. From the buyer’s point of view, it is important to find out what costs and financial risks are associated with the personnel, so that they can accurately define the purchase price or prepare for risks in another way in the contract of sale.
Correct timing of due diligence on HR matters according to interest
It can be useful for the company to have a due diligence report on HR matters done well in advance before starting to look for a potential buyer. In this case, it is possible to predominantly try to solve such HR issues that could become problems in a sales situation. It may be necessary, for example, to negotiate appropriate management contracts for key personnel and to update data protection documentation to comply with legal requirements.
Typically, however, the due diligence report is only actualized when the business arrangement is being finalized. In this case, it is usually in the interest of the buyer to make sure that the company does not have potential employment law risks that could jeopardize the company’s operations or cause significant financial or reputational effects. The buyer is usually interested in, for example, the contract terms of key personnel and the legality of the target company’s operations in compliance with the collective agreement and, for example, in the implementation of cooperation procedures.
Expert help for labor law due diligence
We have assisted our customers in significant business arrangements from both the seller’s and the buyer’s point of view. Our aim is always to understand our client’s key business objectives and to assess the focus of the due diligence from the perspective of their interests. We are familiar with employment law risks, so we can provide our client with the information needed to implement a business arrangement in the best possible way from our client’s point of view.
