Pension schemes can be an important factor in the sale or purchase of a company or its business or when re-structuring a group of companies.  In extreme cases, problems with a company’s pension scheme can even prevent the proposed transaction from going ahead.

How can Vialex help?

Our pensions team can assist at all stages of the process from:

• Carrying out a due diligence exercise, reporting on issues and identifying potential solutions. 
  
• Assisting in deciding how best to structure any deal to take into account a company’s pension arrangements or, if problems cannot be resolved, recommending that a deal does not proceed. 

• Ensuring that pensions are covered in the documentation and provide suitable warranties.  
  
• We can also, if required, help you liaise with the pension scheme trustees and the Pensions Regulator to move matters forward with the minimum of friction.

Carrying out due diligence

Before commencing any corporate deal, it is therefore essential to carry out a full due diligence exercise to identify what pension arrangements are in place and whether there are any problems or issues with these.  This can enable potential vendors to detect and resolve problems that might otherwise derail the proposed transaction and protects potential purchasers from taking on unexpected liabilities.  Solutions can usually be found for most problems, but an issue such as a significant deficit in a defined benefit pension scheme may mean having to re-think how a deal has been structured or even render it uneconomic to proceed.

Liaising with pension scheme trustees or the Pensions Regulator

Where defined benefit pension schemes are concerned it may be necessary for the scheme’s employer to liaise with the trustees regarding the proposed deal and how it might impact on their scheme. 
Trustees are likely to want re-assurances on these issues and may look for an increase in the employer contribution rate and/or putting in place a security over assets such as commercial property.  When liaising with pension scheme trustees and their advisers consideration should also be given to putting in place a confidentiality agreement with them.

If there are concerns at the potential impact the deal may have on the overall strength of the employer’s covenant and/or on scheme funding, it may even be necessary to report the transaction to the Pensions Regulator and seek clearance from them before matters can proceed.

Drafting documentation

It is essential to ensure that the documentation for the transaction includes appropriate pension clauses, including warranties and, if appropriate, indemnities.

For any defined benefit pension schemes if the deal might otherwise trigger the winding up of all or part of the scheme it may also be necessary to put in place what is known as a flexible apportionment agreement or a similar deed. 

For further information please contact Steven Dunn or Scott Moncur (details below).