Mergers and Acquisitions – Volumes in Staffing Sector Remain Strong
Mergers and acquisitions – tax pre-planning is key
Although some of the larger staffing companies have been quiet on this front while they continue to absorb large acquisitions and consolidate platforms, mergers and acquisitions activity continues to remain strong with IT and Healthcare being a focus. Staffing Industry Analysts estimates U.S. temporary staffing M&A activity at roughly 500 acquisitions per year, or 8% of staffing firms.
Often missed in this flurry of breakneck mergers and acquisitions activity however, is a strategy focused on minimizing M&A related compliance risks while maximizing tax opportunities resulting from the new structure. More to the point, a lack of focus on Unemployment compliance risk and tax minimization by staffing providers can lead to significantly higher state unemployment insurance tax payments, compliance violations and undue risk to the staffing organizations involved in the transaction. Margins can be affected for the better or worse without proper handling of these issues.
A recent Equifax whitepaper “Mergers and Acquisitions: An Impact on Unemployment Tax Costs” presents accepted best practices during or shortly following M & A related transactions for staffing providers. Here are a few highlights:
Comply with federal and state rules and regulations governing the transaction
- Including P.L. 108-295; The SUTA Dumping Act of 2004
- Avoid loss of taxable wage base carryover which is often overlooked by the successor for mid-year transactions
- Avoid notices and complications years after the transaction date by notifying the federal and state agencies of any transfer of employees
Utilizing cost management strategies
- Analyze SUI transfer of experience options to obtain the most favorable rate available
- Take advantage of Joint Account and Voluntary Contribution opportunities resulting from the transaction
Proper processing of unemployment claims
- Ensure accurate payment of benefits to claimants of both the predecessor and the successor in order to minimize impact
- Ensure benefit charges are assigned to the correct employer by reviewing charge statements issued by state agencies
Avoid penalties and interest
- Delinquent contributions are often a side-effect of M&A when the transaction isn’t properly communicated to state agencies
- Penalty rates can then ensue thereby significantly inflating the healthcare providers payments for years to come
Download the whitepaper for tips to follow when managing your next transaction, in order to significantly reduce your organizations expenses while increasing its compliance in an industry hyper-sensitive to both. Contact us to learn more.
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