HR Due Diligence

In a merger or acquisition, you acquire more than figures and contracts. You take over the human capital that carries the organisation: employees, leadership, knowledge and culture. Particularly in SME and mid-market organisations, this human capital represents a significant part of both value and risk.

HR Due Diligence primarily focuses on identifying issues and risks in human capital that may affect continuity, performance and value creation after closing. After all, you are taking over both employees and the related obligations.

Focus: human capital as a value driver

Our HR Due Diligence answers the key question of whether the organisation's human capital is sufficiently stable, transferable and future-proof to realise the intended value.

In doing so, we focus on, among other things:

• employee loyalty and engagement;
• the organisation's readiness for change and agility;
• continuity and knowledge retention in critical roles;
• the quality and stability of leadership;
• organisational structure and maturity of HR;
• the risk of employee departures after the transaction is announced or completed.

Remuneration levels

We view employee remuneration levels as an important indicator of retention, stability and future resilience. Deviations in remuneration levels or pay relativities may indicate an elevated risk of employee attrition, limited scalability or strong dependence on individual employees.

What do we review?

Our HR Due Diligence combines desktop research with interviews and in-depth discussions. We analyse, among other things:

• the composition of the workforce and critical roles;
• employee turnover and leaver patterns;
• the nature and patterns of sickness absence, with particular focus on long-term cases;
• available Employee Satisfaction Survey (MTO) outcomes (if any);
• the professionalism of HR policies and the HR organisation;
• dependence on key individuals.

HR Due Diligence in SMEs and the mid-market

In SME and mid-market organisations, we often see a strong dependence on founders or a small number of key individuals, limited succession in critical roles, informal or historically developed HR policies, and an increased risk of employee departures after the transaction is announced.

Our approach

We work pragmatically and with a deal-driven mindset. You receive a clear, action-oriented report with specific points of attention for post-closing management, for example in relation to retention, leadership and organisational design.

HR Legal Due Diligence

In addition to human capital, employment-law and legal HR obligations play an important role in the risk profile of a transaction. These topics are reviewed in a separate HR Legal Due Diligence or as part of a broader Legal Due Diligence process M&A Legal - &Transaction Services.

Focus: employment-law and legal HR risks

HR Legal Due Diligence focuses on identifying employment-law and legal risks that may have financial, operational or compliance impact after closing. The focus is on insight, manageability and transferability of employment relationships.

We examine, among other things:

• employment agreements, contract types and atypical arrangements;
• the use, enforceability and scope of non-compete and non-solicitation clauses;
• application of and compliance with collective labour agreements and collective employment terms;
• pension schemes and related obligations;
• flexible labour, contractors and false self-employment risks;
• employee participation and works council matters;
• incapacity for work and WGA inflow;
• ongoing and potential labour disputes and claims;
• risks in relation to transfer of undertaking.

Choice of scope

Depending on the transaction, the scope may consist of HR Due Diligence, HR Legal Due Diligence or a combination of both. In a combined approach, insights into human capital and legal obligations are assessed in conjunction.