Cornerstone Strategy LLC supports HR due diligence from a people and organizational perspective in situations such as M&A, business acquisitions, investments, joint ventures, and business succession.
In M&A, it is important to review not only financial, tax, and legal matters, but also workforce composition, employment agreements, compensation and benefits, key personnel, organizational culture, labor and employment risks, and the management structure. These factors can significantly affect the transaction price, post-acquisition business operations, employee retention, and the success of post-merger integration.
We help organize information related to the people and organization of the target company or the organization to be integrated, and identify risks that should be understood before the transaction, issues that should be addressed after integration, and opportunities for future value creation.
Do You Face Challenges Like These?
- You do not have a sufficient understanding of the workforce composition or organizational structure of the target company.
- You are concerned about the risk of losing key personnel or local management talent after the transaction.
- You want to review compensation, benefits, incentive plans, and potential integration costs.
- You want to identify potential risks related to employment agreements, employee handbooks, HR policies, or employee classification.
- You are concerned that differences in organizational culture or management style may create issues after the acquisition.
- You want to understand the current state of the target company’s HR systems and HR operations.
- You want to clarify people and organizational priorities in preparation for post-merger integration.
- You want to identify talent and organizational issues that may not be visible through financial or legal due diligence alone.
In M&A, closing the transaction is not the only objective. It is equally important to ensure that employees remain engaged, the organization continues to function, and the expected synergies can be realized after the transaction. To do so, companies need to understand people and organizational issues before closing and consider them in light of post-merger integration.
What Is HR Due Diligence?
HR due diligence is the process of reviewing the target company’s talent, organization, HR systems, employment relationships, compensation and benefits, labor and employment risks, and organizational culture in an M&A or business acquisition context, and organizing the information needed for transaction decisions and integration planning.
Financial statements alone do not fully reveal the quality of talent, organizational execution capability, dependence on key personnel, management maturity, employee retention risks, or cultural differences. However, these factors can have a significant impact on post-acquisition business operations and the success of integration.
For Japanese companies conducting M&A in the United States, it is especially important to consider the expectations of the Japanese headquarters, U.S. employment practices, legal and operational issues, local employee expectations, and the post-integration management structure in an integrated manner.
Cornerstone Strategy LLC supports HR due diligence that contributes to M&A decision-making and post-merger integration from the perspectives of HR, organization, and management.
Key Areas of Support
| Area | Support Provided |
|---|---|
| Review of Workforce Composition and Organizational Structure | We organize information on employee headcount, employment types, job categories, departmental structure, management layers, and key positions. |
| Review of Employment Agreements and HR Documents | We review offer letters, employment agreements, employee handbooks, HR policies, and other employment-related documents. |
| Review of Compensation and Benefits | We organize information on base salary, bonuses, incentives, benefits, 401(k), leave programs, and other Total Rewards-related items. |
| Review of Key Personnel and Retention Risks | We identify executives, managers, specialists, sales, technical, operational, and other critical talent, and organize issues related to turnover and retention risks. |
| Identification of Labor, Employment, and Compliance Issues | We organize potential issues related to employee classification, timekeeping, wages and overtime, leave, recordkeeping, disciplinary actions, and termination procedures. |
| Review of HR Operations | We review the current state of payroll, benefits, HRIS, employee information management, onboarding and offboarding procedures, and leave management. |
| Review of Organizational Culture and Management Style | We organize issues related to decision-making, communication, management practices, organizational climate, and employee engagement. |
| Identification of HR Priorities for PMI | We organize post-integration HR and organizational issues, priorities, and initial actions. |
Expected Outputs
| Output | Description |
|---|---|
| HR Due Diligence Report | We organize findings related to workforce composition, HR systems, employment relationships, compensation and benefits, HR operations, and organizational culture. |
| Talent and Organizational Risk List | We identify talent loss risks, labor and employment risks, integration risks related to HR systems, and potential cultural concerns that should be understood before the transaction. |
| Key Personnel and Retention Issues Summary | We organize key personnel who are important to post-acquisition business continuity and value creation, as well as issues related to their retention. |
| Total Rewards Review Materials | We organize compensation, benefits, incentives, retirement plans, leave programs, and other items that should be reviewed during integration. |
| HR Issues List for PMI | We organize HR and organizational issues that should be prioritized after integration. |
| Management and Investment Decision Summary | We summarize key people and organizational issues for senior management, investors, the Japanese headquarters, and other decision-makers. |
| Initial Integration Action Plan | We organize the direction of HR initiatives, communication, and structure-building activities that should be addressed in the early stage after closing. |
Common Reasons Clients Contact Us
- We want to assess people and organizational risks at the target company.
- We want to organize M&A decision-making materials from a people and organizational perspective, not only from financial and legal perspectives.
- We are concerned that key personnel may leave after the acquisition.
- We want to understand how compensation and benefits integration may affect the transaction and post-acquisition operations.
- We want to review whether the target company’s HR documents and employment agreements have potential issues.
- We want to understand how differences in organizational culture and management style may affect post-merger integration.
- We want to clarify HR priorities that should be addressed after integration.
- We need to organize people and organizational issues to explain them to the Japanese headquarters or senior management.
We will carefully listen to the background of the transaction, the situation of the target company, the issues you would like to review, and the transaction timeline, and help identify the support needed for your organization.