TM - October 2007 - (Page 27) also of such risks as the likelihood of Pension Benefit Guaranty Corp. intervention and the impact of change-in-control agreements. Assessing these risks can help to more accurately determine a target company’s cash flow, as well as point the way to best-practice benefits management and cost-saving approaches that will help create real post-merger value. For example, is the new entity likely to see enhanced value in the freezing of its defined-benefit (DB) pension plans, or might a cash-balance approach make sense, given the people factors and talent-management issues — such as recruiting, retention, career development and employee engagement — that remain crucial to the value equation? As for health and other employee benefits, can their management be costeffectively enhanced by the right combinations of plan offerings, including consumer-directed strategies and the purchasing-power leverage afforded by the new group of employees? And is the new organization going to structure its compensation and benefit strategy from a total rewards APPLYING THE PRIVATE EQUITY MAGIC Successful private equity firms have honed their techniques to capture the value in the entities they acquire. Corporate bidders can learn from private equity firms by observing their comprehensive due-diligence methodologies and by: 1 2 3 Applying the rigor of private equity firms’ due diligence to human capital issues. This includes analysis of underfunded pension plans, health care, medical and life benefits, collective bargaining contracts and changein-control agreements. Noting how private equity firms use insurance capital to resolve deal-negotiation issues such as representation and warranties, including outstanding litigation issues and environmental liabilities. Applying private equity’s approach to the assessment, selection and remuneration of senior managers. On the human capital side of the business, private equity firms devote considerable time to assessing whether to replace inherited management with new, improved leaders. Private equity firms often complement their instinctual assessment with competency-based analyses of both individuals and the team dynamic. 27 October 2007
For optimal viewing of this digital publication, please enable JavaScript and then refresh the page. If you would like to try to load the digital publication without using Flash Player detection, please click here.