Employee Benefits and Executive Compensation

Often the most rigorous test of whether a company (and its counsel) properly designed its executive compensation plans and arrangements comes during a sale, purchase or merger transaction. The seller or target, the prospective buyer, and the executives each will be examining, evaluating, or testing the compensation plan and arrangements. Additionally, outside parties, such as institutional investors, investment bankers and the market, all will be examining or testing the compensation plans and arrangements. The parties each will be asking whether the seller's compensation plans and arrangements:

• Allow the seller to retain the executives through the closing (or abandonment) of the transaction?
• Allow the buyer to retain the executives after the transaction?
• Properly motivate the executives to assist in the transaction and a smooth transition?
• Encourage the seller's executives to work for the highest sale price?
• Make it likely the executives will immediately send out their resumes and/or resist the transaction every step of the way?
• Contain terms and provisions so onerous as to impede the transaction or frighten off prospective buyers?
• Protect the executives from employment termination by the buyer?
• Create tax or securities law barriers that inhibit the transaction?
• Create adverse tax results for the buyer, the seller or the executives?

Winston & Strawn advises clients in the intricate employee benefits and executive compensation issues relating to mergers and acquisitions. Our seasoned attorneys advise sellers on how to protect their benefits plans and employees before and after an acquisition. We also advise buyers on avoiding unwanted liabilities, retaining key employees, and transitioning benefit plans in a merger or acquisition. We handle the due diligence and draft and negotiate the agreements that specify the rights and obligations of all parties.

Our attorneys are skilled in analyzing defined benefit pension plans and other benefit and executive compensation programs for hidden liabilities. This knowledge has become especially critical with the increasing number of companies that have underfunded defined benefit plans, unfunded top hat and supplemental arrangements, and understated retiree health liabilities.

Our partners are frequent speakers and have published several articles on the employee benefit and compensation aspects of mergers and acquisitions. In addition, we offer training programs for companies and their personnel on avoiding liabilities and protecting benefits in a merger/acquisition situation.