Managing Pension Risks In Corporate Transactions - Part 1

Article by Mitch Frazer, Torys LLP, and Jana

Steele, Goodmans LLP

Contents

1.Introduction to Pension Plans

Types of Pension Plans

Defined Benefit Plan

Defined Contribution Plan

Multi-Employer Pension Plan

Funding of Pension Plan

Surpluses and Deficits in Pension Plans

Pension Plan Valuation

Nature of the Transaction

Share-Purchase Transactions

Mergers and Amalgamations

Asset-Purchase Transactions

2. Managing Pension Risks in Corporate Transactions

Due Diligence

Step 1: Signing a Confidentiality Agreement

Step 2: "Valuing" the Pension Plan

Step 3: The Seller's Obligations

Step 4: The Buyer's Obligations

Step 5: Signing a Letter of Intent

Step 6: Retaining Pension Counsel at an Early Stage

Negotiation of Representations and Warranties

Other Provisions in an Agreement of Purchase and Sale

3. Evaluating Options and Obligations in Complex Corporate

Transactions or Restructurings

Pension Issues Specific to Share-Purchase Transactions

Pension Issues Specific to Mergers

Pension Issues Specific to Asset-Purchase Transactions

(i) Buyer does not offer pension plan

(ii) Seller retains past-service liability and buyer offers plan

for future services only

(iii) Wraparound arrangement

(iv) Carve-out arrangement

(v) Transfer of pension plan

4. Strategies for the Successful Conversion of Pension Plans

5. Issues Related to Multi-Employer Pension Plans in Corporate

Transactions

MEPP Issues Specific to Share-Purchase Transactions

MEPP Issues Specific to Asset-Purchase Transactions

6. Conclusion

Mergers and acquisitions can bring a host of pension and

benefits issues to the surface. To minimize the risks ...

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