Mergers and Acquisitions Enhancing the value of Corporate Transactions through

Mergers and Acquisitions Enhancing the value of Corporate Transactions through measured Employee Benefit Consultancy Services www.towrylaw.com Introduction Companies planning, or actively involved in, corporate finance transactions including public quotation, due diligence, merger and acquisition activity, rely on the advice from their professional advisers, pre and post transaction, to ensure the process runs as smoothly as possible. Corporate Accountants, Solicitors and Employee Benefits Advisers are vital in ensuring every aspect of a deal is thoroughly inspected with the financial opportunities or liabilities identified and planned for. It is vital that aspects relating to Employee Benefits are not overlooked, as they may not only involve financial considerations but can also affect the motivation of key employees through significant organisational change. For example, when two companies come together, these companies have often been working to different pay scales and benefit levels. This needs to be addressed as a matter of priority. In the ideal world employees would receive the ‘best of breed’ benefits from both organisations, but the cost of such a move may be prohibitive. Key considerations: • • • • • • • Is there a pension liability that will have a significant financial impact and how can that be controlled? Do we know what benefits are in place, how they are managed and administered? Will there be a need to change/alter the Employee Benefits structure? Can we reduce the costs of benefits by harmonising and consolidating schemes? Do we need to increase the range of benefits to attract and retain employees? Do the schemes comply with current legislation? Are the benefits communicated effectively enough so employees know what they can expect to receive and perceive high value in them as part of their reward package? 1 www.towrylaw.com It is vital that companies maximise the return on their investment in relation to Employee Benefit spend given the level of investment this often involves. Benefits can include: Pensions: Trust Based • • • • • Defined Benefit (Final Salary) Contracted-in Money Purchase (CIMP) Contracted-out Money Purchase (COMP) In-house AVCs (Final Salary or Money Purchase) FSAVCs (Money Purchase only) Pensions: Contract Based • • Group Personal Pension (GPP) Group Stakeholder Group Risk Protection & Support • • • • • • • • Group Life/Death in Service Surviving Spouses’ Pension Group Income Protection Group Critical Illness Group Private Medical/Medical Cash Plans Health Screening Dental & Optical Insurance Employee Assistance Programme Lifestyle • • • • Child Care Vouchers Gym Membership Discounted Cycle Scheme Discounted On-line Shopping 2 Employee Benefit Services Companies operating Employee Benefits usually need external support to ensure all processes are managed effectively and there is clear communication to employees. Towry Law consultants can provide these services in relation to Employee Benefits and are experienced at working alongside Corporate Solicitors or Accountants to ensure the most appropriate solutions are provided. The key areas on which we would normally focus are: • • • • • Independent Benefit Review Pension Scheme Review Group Risk Consolidation/Harmonisation for Cost Savings Consideration of Flexible Benefits Communicating Benefit Changes to Employees 3 www.towrylaw.com Independent Benefit Review It is important to review benefits, at this time, in order to consolidate existing arrangements and provide the potential to reduce costs and/or improve benefits to employees. Our benefits review will evaluate all aspects of your existing arrangements, including analysis of third party providers, investment strategy, value for money and service levels. We can also make comparisons with sector competitors and, using our experience, provide guidelines on appropriate levels of benefits for your staff. It is usually the case that we are able to make cost savings for employers. An important element is that many existing arrangements incorporate charges for commissions payable to the existing or previous Financial Adviser. We do not take commissions and so these are reinvested back into the scheme in order to reduce costs or improve benefits. Following our analysis, we will produce a comprehensive report that will: • • • • summarise the content and relevance of your current employee benefits package; benchmark the levels of benefits provided for all categories of staff; identify cost saving opportunities and potential benefit improvements; assess whether schemes comply with current legislation (including, as examples, but not limited to the Pensions Acts of 1995 and 2004 and the Age Discrimination legislation). 4 Pension Scheme Review In many Employee Benefits packages, the pension scheme will be seen, by employees, as the core benefit. However, this can also be the area that causes the most problems for an acquiring employer. Our services include: • Pension review Analysis of the existing pension scheme arrangements, both occupational and contract-based and following an assessment of the employer’s future needs, produce a report on the options available for future provision. • Scheme discontinuance Focuses on schemes where winding-up is a consideration or the process has already been instigated. It requires specialist skills, experience in dealing with employers and beneficiaries, as well as an assessment of the demands placed on trustees by the relevant regulations and reporting requirements. For contract-based schemes we can assist in consolidating numerous schemes and establish them on an efficient and streamlined administration platform. • Scheme design Guidance on the design, funding, investment, documentation and communication of suitable pension arrangements. • Proactive commentary Advice on the implications of changes in pensions law and other relevant legislation for both employers and employees. • • Provide Trustee Training Investment consultancy Advice to trustees on the appropriate strategies to meet the scheme’s liabilities taking into account the employer’s objectives and the trustees’ attitude to risk. 5 www.towrylaw.com Group Risk Consolidation/Harmonisation for Cost Savings The harmonisation of benefits and contracts should take place as soon as practicable. This will help to support the idea of the merger or acquisition producing one resultant company where employees are treated equally, regardless of which of the companies they came from. There is the potential of significant savings through reviewing existing arrangements and also utilising increased buying power when negotiating terms with product providers. Towry Law has extensive experience of these procedures and helping to manage relationships between employers and employees. 6 Consideration of Flexible Benefits An increasing number of companies are re-evaluating their benefits packages, to reflect the demand for greater flexibility and choice, as well as initiatives to help the work/life balance. The time of a Merger, Acquisition or Corporate Restructuring is ideal to consider the range of benefits offered to employees and how they are packaged, and with effective communication can send out a strong positive message to staff. Flexible Benefits can take different forms, geared to each organisation’s market, priorities and staff profile. Some may incorporate a fully flexible menu approach, while others retain certain core benefits and allow staff to make choices on additional opt-in elements that can be tailored to their own personal circumstances. Salary Exchange (also known as Salary Sacrifice) is also a popular and tax efficient option. In every case, a fully integrated online system ensures efficient and cost-effective administration. All packages include certain features, such as total reward statements, to help communicate the benefits and emphasise their value to the employee. Holiday booking and Absence Management reporting is often included to reduce the HR administrative burden. 7 www.towrylaw.com Communicating Benefit Changes to Employees When companies are involved in Merger and Acquisition activity or Corporate Restructuring, this is often a time of great uncertainty and insecurity for employees. This is especially the case where there are likely to be redundancies and it is perfectly natural for employees to consider their positions, likely outcomes of the changes and alternative employment options. Throughout the whole process, effective communication to employees is of paramount importance. Employees need to understand why the Merger, Acquisition or Restructuring is taking place and as much as possible buy into that decision. Employees need to be engaged with on different levels and Towry Law has extensive experience of advising on and co-ordinating these activities with many different types of organisations. This communication then needs to be followed up by actions so that employees understand that the company will be doing what it says. A number of ‘quick wins’ are important to help build employee confidence and engagement. So again, communication with regard to how these issues will be addressed, and how this is fair to employees, is key. Where contract harmonisation takes place without effective communication, an employee is likely to focus on the loss or reduction of one benefit rather than any potential gains they have made in other areas. This again can lead to the potential loss of employees, and the time, cost and inconvenience of having to recruit. 8 The Next Step Towry Law offers an initial meeting that is free of charge and obligation. This will provide you with the opportunity to find out exactly how we work and to determine whether our services will be of benefit to you. To arrange an initial meeting please call 0845 050 0112. 9 www.towrylaw.com About Towry Law Towry Law was founded in 1958 and is established as one of the premier providers of Employee Benefits Consultancy services and Investment Management in the UK. We are a fee-based organisation and the focus of our service is to provide employers with value for money while assisting them in their quest to attract, retain and motivate the best employees for their company. We have particular expertise in working alongside companies that are planning, or have gone through, mergers, acquisitions and corporate restructuring. We have a nationwide presence with offices around the UK. We only employ top quality Employee Benefits Consultants and support these with comprehensive technical resources and administration support to ensure we provide the best level of advice and service to our clients. 10 0093/TA0850/Sept 2007 Towry Law Financial Services Limited Towry Law House Western Road Bracknell RG12 1TL 0845 050 0112 info@towrylaw.com Printed on Mega, a recycled paper produced with care for the environment. www.towrylaw.com