In any acquisition, whether for shares or assets, employee
benefits and obligations must be taken into account. One of the
potentially most onerous obligations includes the provision of
pension benefits to employees – this makes it all the more
important for companies contemplating acquisitions to consider
potential employee pension plan implications.
In a share purchase context, the buyer will typically assume all
liabilities of the target company, and if the target company has a
pension plan in place, this will often be included. However, if
there are significant pension fund deficits, this may be one reason
an asset purchase agreement is more desirable. With an asset
purchase agreement, the pension plan is not automatically
transferred to the new company. An asset purchase allows companies
to come up with creative options for addressing pension plan
considerations. The options include closing plans, merging plans,
moving employees to different plans, or changing