M&A support and labor labor due diligence
Our firm collaborates with Okinawa M&A Support Co., Ltd. to assist local small and medium-sized enterprises (SMEs) in Okinawa with mergers and acquisitions (M&A), including business transfers and successions, from a human resources and labor perspective.
In recent years, M&A and business succession have gained attention as exit strategies for aging business owners. In fact, the number of M&A and business succession cases in Japan doubled between 2010 and 2018, and this trend is expected to continue.However, most of the cases handled by major consulting firms known as “M&A boutiques” involve large-scale deals worth billions of yen, and very few major firms handle M&A for small-scale, successor-less local SMEs.In contrast, Okinawa M&A Support, comprised of local certified professionals (tax accountants, lawyers, judicial scriveners, and labor and social security attorneys), primarily supports M&A of local SMEs with business scales under several hundred million yen. We believe that only local experts rooted in the community, who can continue to support the company even after the transaction, are truly capable of handling these cases.Our firm's HR and labor support in M&A primarily consists of two services: labor audits (labor due diligence) and post-M&A support.
Labor Audit (Labor Due Diligence)
“Labor audit” refers to the investigation of whether labor-related laws and regulations are being properly observed within a company. Due diligence is typically associated with legal and financial audits used to assess the value of a business in M&A transactions. However, labor audits are optional and have not been widely implemented until recently.That said, issues like unpaid overtime or labor disputes often become “hidden liabilities” that do not appear on financial statements but emerge at the end of negotiations, becoming obstacles to closing the deal. For this reason, an increasing number of M&A transactions now include labor audits in addition to traditional financial audits.Labor audits are not limited to M&A or succession planning. They are also gaining attention in normal business operations as a proactive risk management tool that helps companies check in advance whether labor issues exist and where they may lie, especially in preparation for labor inspections by government agencies.Our firm offers a comprehensive labor audit package consisting of 10 checklist items across 8 different areas to assess labor-related risks.
Labor Risk Diagnosis with 80-Question Checklist Across 8 Key Areas
Our audit covers eight critical areas that are frequently scrutinized by labor standards inspectors and are common sources of conflict between employers and employees.
The results of the diagnosis will be compiled into an audit report that includes prioritization of identified issues, and will be delivered along with a detailed explanatory report.
Deliverables
- Audit Result Report
- Report Covering 80 Questions
- Work Rules Diagnostic Sheet
- Document Templates to Protect the Company (Data Provided)
Required materials include work rules, timecards, and wage ledgers. We also conduct interviews.
Based on the findings, we prioritize issues such as “urgent corrective actions” and “corrective actions,” and explain the key points for future improvement.
Post-M&A Support
After an M&A is completed, it becomes essential to unify internal rules and corporate values between the acquiring and acquired companies. Usually, the acquired company adjusts to the rules of the acquiring company, but since both were operated under different internal rules and values, immediate and mechanical unification is not practical. Especially regarding HR and labor systems, employee sentiment must be considered. It takes time to avoid conflict, and in some cases, partial retention of pre-M&A systems may be necessary.
Our firm supports post-M&A integration by accompanying the companies through an ongoing retainer contract, ensuring smooth alignment of systems and values.