Merger and Acquisition Due Diligence

How do Mergers, Acquisitions and other Major Changes affect I-9 Requirements?

While a closing may be a cause for celebration at a company, it can also be the cause of a nightmare for a company since 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. 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 should consider adding I-9s to a merger checklist and have all employees of the combined company complete I-9 forms on the day of closing or beforehand. In any case, an immigration lawyer should be consulted in any merger, acquisition or divestiture to ensure that the transaction does not result in new immigration problems.

As widely reported in the media, Immigration & Customs Enforcement (ICE) and other federal law enforcement agencies are intensifying their enforcement activities against employers in the area of immigration verification.  At the same time, many states, including Colorado, have passed their own, often draconian, immigration laws. These developments of the utmost importance to individuals involved in mergers and acquisitions and the Rocky Mountain Employers Immigration Alliance can play a critical role in this area.

Attorneys, investment bankers, and other individuals involved in the merger and acquisition process engage in myriad of 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.  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.

Any company that has not implemented best practices in terms of complying with federal and state laws regarding immigration-related employment compliance and verification faces the possibility of significant fines, disbarment from government contracts, potential criminal liability and intense negative publicity.  Companies operating in sectors that traditionally hire a significant number of foreign-born individuals can also face an immediate and dramatic reduction in their workforce in the event of an ICE raid or audit.  In light of these realities, it is essential that immigration-related employer compliance and verification policies, practices, and liabilities be an important focus in the due diligence that accompanies the selling and buying of businesses as well as mergers and acquisitions.



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