Full Picture of Employee Immigration Status Is Key to M&A Review

Mergers and acquisitions are a crucial piece of the corporate strategies of businesses seeking to expand. But there are numerous legal obligations and risks, notably in immigration matters.

Understanding immigration dynamics is paramount for both buyers and sellers. Overlooking these considerations can lead to legal hurdles and operational disruptions—potentially derailing the entire transaction.

Purchaser Perspective

Meticulous examination of the target’s immigration landscape is part of purchasers’ due diligence. This entails assessing the status of foreign-national employees, identifying potential compliance issues, and understanding ongoing sponsorship obligations. From visa transfers to compliance with employment authorization, every detail must be scrutinized to ensure a seamless integration process.

When conducting employee immigration sponsorship and recordkeeping analysis, delve into each employee’s employment authorization status post-acquisition, and identify any necessary changes.

Key areas include the impact of changes in corporate ownership structure, employment eligibility verification; analysis of employee immigration sponsorship and recordkeeping, evaluation of sponsorship requirements for specialty occupation roles, and ensuring continuity in green card sponsorship and employment verification.

Such diligence allows the purchaser insights into forthcoming immigration budgets and auditing risk and compliance issues. It also helps determine the need for a new or expanded immigration team.

Assessing the immigration vendors/contracts of the acquired company is essential to decide whether to maintain them, integrate them with your current vendor, or initiate a request for proposals if you lack immigration counsel.

Post-acquisition, companies must evaluate visa requirements for employees—especially for roles requiring H-1B, L-1, or E treaty visas—and plan for necessary amendments or reassessments to ensure ongoing compliance. It’s also key to understand the implications of the acquisition for ongoing permanent residence sponsorships and prioritize compliance with I-9 verification rules and immigration laws.

Orderly transition planning, transparent communication with affected visa beneficiary employees, alignment of immigration policies post-acquisition, and consideration of cross-border travel for buyers located outside the US help retain talent and create operational synergy in the merged entity.

Seller Perspective

Ensuring immigration compliance is just as important for targets preparing for sale. Conducting an internal audit of immigration records and policies prior to the purchaser’s due diligence process helps proactively identify areas for improvement or potential risks.

When assessing employee immigration sponsorship and recordkeeping prior to a sale, review the public access files, green card-related audit packets, and immigration status of visa beneficiary employees to update records and address any pending sponsorship or compliance issues. Provide comprehensive information to potential buyers on employees’ visa statuses, including pending applications or ongoing sponsorships.

Demonstrating a commitment to compliance with I-9 verification rules and immigration laws enhances the attractiveness of your company to potential buyers. Collaborating with potential buyers to align on immigration policies and facilitate the onboarding process for employees ensures continuity and stability throughout the acquisition process.

Conversely, poor recordkeeping and compliance can lead a buyer to second-guess recordkeeping and compliance in multiple other areas, including general human resources, accounting, and contracts.

Fix potential issues before the buyer raises them. It’s frustrating to a seller when a buyer digs deeper into recordkeeping and legal compliance across multiple departments due to weaknesses in one area.

What seems like a small non-compliance issue on I-9 verification, for example, has potential to escalate across multiple diligence workstreams. This can lead to negotiations involving decreased purchase price, establishment of special indemnity rights, higher escrow amounts, and exclusions from representations and warranties insurance policies.

Outlook

Buyers and sellers should proactively engage immigration legal counsel. Their expertise can help navigate complexities, ensure compliance, and rationalize processes. By addressing immigration matters early in the M&A process, organizations can foster talent and lay the foundation for long-term success.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Susan Oakes is M&A partner at Holland & Hart, with focus on transactions and equity financings in the US and internationally.

Samantha Wolfe is immigration partner at Holland & Hart, providing strategic counsel to help employers navigate complex challenges.

Ann Lee is immigration partner at Holland & Hart and works with companies on proactive plans and programs to meet their talent needs.

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