Merger and Acquisition Due Diligence

Compliance with U.S. immigration law is often overlooked in mergers and acquisitions but companies would be well-advised to include immigration as part of their due diligence efforts in the process.   While a closing may be a cause for celebration at a company, it can also be the cause of a nightmare as it can instantly render all completed I-9s for an acquired company invalid. If the acquiring company does not assume all of the assets and liabilities, then the I-9s will likely not transfer to it. In a merger case where the acquiring entity is a successor in interest, new I-9s will not be needed. However, I-9s should be checked in the due diligence process to ensure that the acquired I-9s are in good shape.

Employers involved in mergers and acquisitions also need to ensure immigration compliance with respect to any foreign national employees working on temporary immigration status such as H-1B, L-1, etc.  When employers acquire new employees through a merger or acquisition they must proactively address immigration issues related to any foreign national employees to ensure compliance with the law . Otherwise, the closing of the deal is likely to result in their suddenly being out of compliance and a need for urgent action.

Attorneys, investment bankers, and other individuals involved in the merger and acquisition process engage in myriad due diligence activities with one glaring exception.  It has not yet become standard practice for sellers, buyers, investors or their representatives to carefully scrutinize the target company’s immigration compliance and verification policies, procedures, and liabilities.  Employers should consider adding immigration issues to a merger and acquisition checklist and consult an immigration attorney.

In the current environment of intensifying enforcement, it is extremely important for every company to employ best practices in the area of immigration-status compliance and verification.  This is particularly true for companies operating in sectors that have traditionally employed a significant number of foreign-born individuals, from IT to construction to the restaurant business to the resort industry.