Essential HR Due Diligence Checklist for Private Equity M&A

Discover how a comprehensive HR due diligence checklist can protect your investment and position your portfolio companies for rapid value creation.

Why HR Due Diligence is Critical in Private Equity M&A

In private equity transactions, time is compressed, and the stakes are high. A comprehensive HR due diligence checklist ensures no stone is left unturned, protecting your investment from hidden liabilities and positioning portfolio companies for rapid value creation. By identifying workforce risks, compliance issues, compensation and benefits liabilities, key personnel exposures, and cultural factors, you can make informed decisions that support deal valuation and RWI underwriting preparation.

Organizational Structure and Workforce Composition

A thorough review of the organizational structure and workforce composition is essential for understanding the current state and identifying areas for optimization. Key elements include:

• Organizational Chart: A complete org chart with names, titles, and reporting relationships provides a clear overview of the company's hierarchy.
• Headcount Summary: Total FTEs by department, location, and employment type (FTE, part-time, contractor) help assess workforce distribution.
• Workforce Demographics: Age distribution, tenure, gender, and diversity metrics highlight the company's diversity and potential areas for improvement.
• Span of Control Analysis: Direct reports per manager by level identify potential inefficiencies in management structure.
• Key Person Identification: Roles critical to operations, revenue, or institutional knowledge are flagged for retention and succession planning.

Compensation and Total Rewards Analysis

Analyzing compensation and total rewards is crucial for understanding the company's financial commitments and ensuring competitive positioning. Key areas to evaluate include:

• Salary Structure: Salary bands by level, function, and location provide insights into pay equity and competitiveness.
• Market Benchmarking: Competitive positioning versus industry peers (25th, 50th, 75th percentile) helps assess the company's attractiveness to top talent.
• Incentive Compensation: Annual bonus plans, sales incentive plans, and long-term incentive plans (options, RSUs, phantom equity) are evaluated for alignment with business objectives.
• Benefits: Health & welfare programs, retirement plans, and wellness programs are reviewed for cost-effectiveness and employee satisfaction.
• Transaction-Triggered Costs: Severance obligations, accelerated vesting, and success bonuses are identified to understand the financial impact of the transaction.

Legal and Regulatory Compliance

Ensuring legal and regulatory compliance is critical to mitigating risks and avoiding costly penalties. Key compliance areas include:

• Employment Law Compliance: FLSA, wage & hour compliance, pay equity, and state-specific laws (e.g., California PAGA, New York wage theft) are reviewed.
• Immigration & Work Authorization: Visa sponsorships, I-9 compliance, and recent immigration audits are assessed.
• Background Checks & Screening: FCRA compliance, drug testing policies, and driver's license verification for roles requiring driving are evaluated.
• Workplace Safety & OSHA: Recordable injuries, workers' compensation claims, and safety programs are reviewed to ensure a safe working environment.
• Litigation & Claims: Active employment-related lawsuits, EEOC charges, and Department of Labor audits are identified to understand potential legal liabilities.

Cultural Assessment and Integration Planning

A cultural assessment is vital for ensuring a smooth post-transaction integration and aligning the workforce with the new company's values and objectives. Key components include:

• Core Values: Stated values versus lived behaviors provide insights into the company's culture.
• Cultural Archetypes: Hierarchical versus flat, collaborative versus competitive structures help understand the company's operating style.
• Employee Engagement: Recent survey results, participation rates, and eNPS scores highlight employee sentiment and areas for improvement.
• Internal Communication: Channels (town halls, Slack, email) and effectiveness of internal communication are assessed to ensure transparency and alignment.

Leveraging 29Bison's Expertise for Effective HR Due Diligence

At 29Bison, we don't just provide checklists—we deliver insights-driven HR due diligence that quantifies risks, identifies opportunities, and accelerates integration planning. Our comprehensive due diligence services include:

• Customized Diligence Frameworks: Tailored to your investment thesis, whether focused on growth or operational improvement.
• Rapid Turnaround: Delivering thorough assessments within 3-5 weeks without compromising on rigor.
• Quantified Risk Modeling: Assessing the valuation impact of identified risks and providing actionable recommendations.
• Day 1 Readiness Planning: Ensuring smooth transitions with detailed integration roadmaps and stakeholder alignment.

For an in-depth understanding of HR due diligence best practices, refer to our Ultimate Guide to HR Due Diligence. Our expert team at 29Bison is here to support you every step of the way in maximizing investment value through human capital improvements.

Why 29Bison?

Choosing the right partner for HR due diligence and integration is critical to the success of any transaction, and 29Bison offers unmatched expertise and support in navigating these complexities. With a people-first approach, we go beyond traditional due diligence to address not only workforce-related risks but also opportunities that drive long-term value creation. Our comprehensive HR due diligence services uncover hidden risks, optimize workforce strategies, and identify synergies that align with your strategic objectives. Post-transaction, we provide tailored HR integration solutions designed to foster a seamless transition, retain key talent, and build a cohesive organizational culture that supports sustainable growth. And finally, 29Bison’s Fractional HR Operating Partner service provides private equity firms with strategic, high-impact HR leadership, driving value creation, talent optimization, and seamless workforce integration across portfolio companies,

At 29Bison, we’re more than human capital consultants—we’re partners invested in helping you achieve your vision by maximizing the potential of your most valuable asset: your people. Let us help you turn challenges into opportunities and create a solid foundation for success. Reach out today to learn how we can support your HR diligence and integration needs.