M&A Due Diligence Checklist and Process

Global M&A deals look deceptively simple on paper. Two companies, one transaction, endless growth potential. But here’s what the boardroom presentations rarely mention: while financial due diligence gets all the attention, employment compliance across multiple countries can quietly sabotage even the most promising acquisition.

This is the hidden reality of global M&A. While dealmakers focus on financials and market synergies, the human side of these transactions often becomes the biggest stumbling block. Employment law violations in Germany, misclassified contractors in Brazil, or incomplete payroll records in Singapore can tank a deal faster than any balance sheet red flag.

The stakes are real. McKinsey research shows that 30% of the largest global acquisitions over the past two years experienced delays beyond their control, with deals stalling for an average of six months. Similarly, a 2025 study by SRS Acquiom found that 59% of dealmakers say due diligence timelines have been extended by 1-3 months, with half of all deals now taking at least six months from initial information-sharing to closing.

Some deals collapse entirely when buyers discover the true cost of bringing foreign employees into compliance. Others close, but leave the acquiring company scrambling to fix inherited HR disasters while trying to integrate two businesses. That’s why smart M&A teams build employment due diligence into their process from day one.

What is M&A due diligence?

M&A due diligence is essentially corporate detective work. It’s the systematic investigation of a target company’s financial health, legal standing, operational efficiency, and strategic position before any money changes hands. Think of it as a comprehensive audit designed to answer one critical question: what exactly are you buying?

The process typically covers four core areas: financial due diligence (examining revenue streams, debt, and cash flow), legal due diligence (reviewing contracts, litigation history, and regulatory compliance), operational due diligence (evaluating day-to-day processes and organizational structure), and tax due diligence (assessing tax affairs and potential liabilities). Each area serves as a lens through which buyers can spot potential risks or hidden value.

But when global workforces enter the picture, the complexity multiplies exponentially. A company might have employees in 12 countries, contractors across three continents, and payroll systems that follow entirely different compliance frameworks. Suddenly, due diligence becomes a matter of understanding not just what the company does, but how it operates across multiple legal jurisdictions with vastly different employment laws.

The stakes get higher with international teams because labor law violations in one country can derail an entire acquisition. A misclassified contractor in Canada or incomplete payroll records in Mexico could surface weeks into the process, forcing buyers to reassess deal terms or walk away entirely. This is why workforce due diligence has become a make-or-break component of successful global M&A transactions.

International M&A is volatile, particularly amid heightened geopolitical tensions. According to Brian Levy, Global Deals Industries Leader at PwC, “M&A volumes globally continue to decline: they dropped by 9% in the first half of 2025 compared with the first half of 2024, while deal values are up 15%.”

“The data on global M&A transactions across all sectors in the first half of 2025 reflects this tension between understandable caution in the face of greater uncertainty and, at the same time, urgency about moving forward with transformation plans,” Levy adds. This makes a strategic M&A due diligence process a vital ingredient for success.

The M&A due diligence process: Key steps

Due diligence follows a predictable rhythm, but when global workforces enter the picture, each step becomes exponentially more complex. Here’s how smart acquirers navigate the process while keeping workforce risks front and center.

1. Preliminary assessment

This is your first glimpse behind the curtain. Teams review financials, operations, and geographic footprint to understand what they’re actually buying.

Red flags often surface here: contractors who should be employees, payroll systems that don’t match local requirements, or workers in countries where the company has no legal presence. These discoveries shape the entire due diligence strategy moving forward.

2. Legal and compliance review

Now comes the detective work. Legal teams confirm entity registrations, examine employment contracts, and evaluate permanent establishment risk in each country.

Employment agreements get special attention here. Are they compliant with local labor laws? Do they include mandated benefits? One missing employment contract in Singapore can expose the acquiring company to a liability it never saw coming.

3. HR and workforce analysis

This step goes beyond headcount to examine whether employment relationships will actually survive the transition. Teams audit compensation, benefits, and worker classification while assessing retention risks.

Global workforce analysis means understanding that employee rights in Austria look nothing like those in Singapore or Brazil. Teams must evaluate current compliance and whether the target can maintain proper employment practices during integration chaos.

4. Tax and payroll review

Payroll systems reveal the truth about compliance. Teams evaluate employer contributions, social taxes, and whether there are outstanding arrears across operating countries.

The complexity multiplies with each additional jurisdiction. Some countries require 13th-month pay, others mandate profit-sharing, and many have unique year-end calculations. Payroll errors discovered here let buyers factor remediation costs into their deal structure.

5. Integration planning

This transforms findings into action. Teams assess whether the acquiring company can absorb the global workforce or needs external support through an Employer of Record (EOR) partnership.

Integration planning addresses practical concerns like harmonizing benefits and ensuring continued compliance during transition periods. It’s where companies decide if they’re ready to manage a global workforce or need expert help to avoid regulatory disasters.

M&A due diligence checklist

Due diligence checklists prevent deals from derailing when workforce surprises surface at the worst possible moment. Here’s your comprehensive roadmap for evaluating global workforce risks before they become expensive problems.

Corporate and legal

Corporate and legal due diligence forms the foundation of any international acquisition by confirming that the target company can legally operate in each jurisdiction and won’t expose the buyer to unexpected regulatory violations. Without proper entity registration and compliance verification, buyers risk inheriting permanent establishment tax obligations, regulatory fines, or even criminal liability in certain countries.

Entity registration and structure

• Confirm that the target company maintains proper legal entity registration in each operating country, including current certificates of good standing and active corporate records.
• Verify that local directors, bank accounts, and registered offices are properly maintained where required by local corporate law.
• Review corporate structures to ensure compliance with local ownership laws, especially in countries with foreign investment restrictions.

Permanent establishment and tax risks

• Assess permanent establishment exposure in countries where the company operates without formal entities, as this can trigger unexpected tax obligations.
• Identify tax obligations triggered by business activities that exceed local thresholds for physical or economic presence.
• Evaluate existing transfer pricing agreements and tax sharing arrangements to understand cross-border tax implications.

Legal representation and documentation

• Verify that the company maintains relationships with qualified local legal counsel in each jurisdiction where it operates.
• Review incorporation documents, board resolutions, and corporate minute books to ensure proper corporate governance.
• Confirm that all regulatory licenses and permits required for business operations are current and in good standing.

Workforce and HR

Workforce and HR analysis reveals whether the company’s most valuable asset—its people—will actually transfer successfully to new ownership without triggering costly compliance violations or mass departures. Employment law violations can delay deals by months, while misclassified contractors or non-compliant agreements can expose buyers to significant financial penalties and legal liability.

Employee demographics and classification

• Obtain a complete headcount breakdown by country and employment type, including full-time, part-time, temporary, and contractor classifications.
• Audit contractor versus employee classifications carefully, especially in Germany and India, where misclassification criteria are strict and penalties severe.
• Document employee skill sets, tenure analysis, and leadership pipeline to assess retention risks and knowledge gaps.

Employment contracts and agreements

• Review all employment contracts for proper termination clauses, notice periods, and severance obligations that comply with local labor laws.
• Examine non-compete agreements, confidentiality clauses, and intellectual property assignments to ensure enforceability and proper scope.
• Assess severance obligations across jurisdictions, particularly the difference between EU notice requirements and U.S. at-will employment structures.

Collective bargaining and union relations

• Identify all active collective bargaining agreements and union relationships that could affect workforce integration or restructuring.
• Map mandatory consultation timelines for European works councils, which typically require 30 to 90 days for major organizational changes.
• Review potential penalties for non-compliance with union agreements, including fines in Belgium or criminal charges in France for violations.

Immigration and work authorization

• Verify immigration status and work permits for all foreign workers to ensure continued legal employment post-acquisition.
• Confirm visa compliance and renewal timelines to avoid workforce disruptions during integration.
• Assess the company’s dependency on specific immigration programs that could affect business continuity.

Payroll and benefits

Payroll and benefits analysis uncovers the true cost of employment by revealing unpaid liabilities, non-compliant contribution calculations, and statutory obligations that weren’t reflected in the target’s financial statements. These hidden costs can add millions to the acquisition price, while non-compliance issues can trigger immediate regulatory action in countries with strict labor enforcement.

Payroll systems and compliance

• Document all payroll providers and systems used by country, including service agreements and compliance certifications.
• Verify currency handling procedures and local contribution compliance for social security, pension, and unemployment systems.
• Review payroll tax registrations and social security obligations to ensure all employer responsibilities are met.

Statutory benefits and contributions

• Audit pension plans, health insurance programs, and mandatory paid time off policies to ensure compliance with local requirements.
• Confirm proper calculation and payment of 13th-month pay, holiday bonuses, and other statutory compensation where required.
• Verify that employer contributions and social tax calculations are accurate and current across all jurisdictions.

Outstanding liabilities

• Identify all unpaid bonuses, accrued leave balances, and pending severance obligations that could become post-acquisition liabilities.
• Review deferred compensation plans and unvested equity arrangements that may accelerate upon change of control.
• Calculate potential harmonization costs for aligning benefit programs across the combined organization.

Systems and operations

Systems and operations due diligence determines whether the target’s HR infrastructure can integrate with the buyer’s existing platforms or requires complete replacement. Data privacy compliance failures, particularly GDPR violations, can result in fines up to 4% of global revenue, while incompatible systems can delay workforce integration for months.

HR technology and integration

• Audit HRIS systems, payroll platforms, and talent management tools to assess integration complexity and data migration requirements.
• Evaluate system compatibility and identify consolidation opportunities for unified HR technology platforms.
• Assess licensing agreements and vendor relationships that may require renegotiation post-acquisition.

Documentation and processes

• Review onboarding and offboarding procedures by country to ensure consistent application of local employment laws.
• Examine performance management systems and disciplinary processes to identify compliance gaps or improvement opportunities.
• Assess employee handbook compliance with local labor laws and cultural expectations across all operating countries.

Data privacy and compliance

• Confirm GDPR compliance for all European employee data, including proper consent mechanisms and data processing agreements.
• Review data transfer agreements and privacy policies to ensure cross-border employee data handling complies with local regulations.
• Assess employee records management and retention policies to meet varying legal requirements across jurisdictions.

How an EOR supports M&A due diligence and integration

When workforce complexity threatens to derail your global acquisition, a strategic EOR partnership transforms potential deal-breakers into manageable transitions. EORs provide the infrastructure and expertise to maintain compliant employment across dozens of countries while buyers focus on integration strategy rather than employment law nuances.

• Compliant employment of target talent. An EOR assumes immediate legal employer status for foreign employees and contractors post-close, eliminating delays from entity setup, tax registration, or local banking requirements.
• Risk mitigation. EORs deliver compliant employment contracts, benefits administration, and payroll across hundreds of countries, reducing exposure to misclassification penalties and regulatory fines. Every aspect of employment, from contracts to termination procedures, complies with jurisdiction-specific legal standards, protecting buyers from enforcement action and legal claims that could surface months after closing.
• Workforce continuity. Global talent retention becomes manageable when employees see stability rather than uncertainty during ownership transitions. An EOR reassures staff through smooth employment continuation, stabilizing teams, and protecting institutional knowledge during periods of organizational change that typically trigger preventable attrition.
• Flexibility. EORs function as bridge solutions for companies not ready to absorb international employees into internal structures or establish entities in every operating country. This flexibility allows buyers to retain key talent in strategic markets while phasing entity establishment or determining long-term operational footprints without workforce disruption.
• Data and reporting. EORs provide consolidated workforce data and documentation across multiple jurisdictions, supporting deal transparency during due diligence and streamlining post-close HR integration. Buyers receive unified reporting that simplifies financial control and audit readiness while maintaining detailed compliance documentation for regulatory requirements in each country.

Post-close: Why an EOR is key to global workforce integration

The real test of any global acquisition happens after the champagne stops flowing and integration work begins. An EOR transforms the chaos of merging international workforces into a manageable process that keeps talent engaged and operations running while you figure out your long-term structure.

• Compliant onboarding across borders. An EOR handles legally compliant onboarding for retained talent in dozens of countries simultaneously, eliminating the months-long delays of setting up local entities or navigating unfamiliar employment laws.
• Streamlined benefits and payroll alignment. Instead of juggling multiple payroll providers and benefit systems across countries, an EOR consolidates everything into unified processes that meet local requirements while providing centralized reporting.
• Seamless contractor conversions. The best EORs enable smooth transitions from contractor to full-time employee status without triggering misclassification penalties or compliance violations that could derail integration timelines.
• Permanent establishment risk avoidance. An EOR maintains a compliant market presence during restructuring without creating permanent establishment tax triggers that could expose the acquiring company to unexpected liabilities.
• Talent retention during uncertainty. Employees see employment continuity rather than organizational chaos, reducing the attrition that typically spikes during ownership transitions when job security feels uncertain.
• Flexible workforce scaling. An EOR provides the flexibility to adjust headcount up or down during integration without the structural limitations of traditional international operations or entity requirements.
• Centralized compliance management. Instead of managing employment law compliance across multiple jurisdictions independently, an EOR provides expert oversight that reduces legal risk while you focus on business integration.

Why Pebl makes M&A integration simple

When workforce complexity threatens to unravel your global acquisition, Pebl transforms potential deal-breakers into seamless transitions across 185+ countries. Pebl’s proven compliance expertise has earned recognition as a four-time industry leader in NelsonHall’s 2025 Global EOR evaluation, and with more employment licenses than any other EOR and a #1 rating for compliance on G2, Pebl provides the legal infrastructure and local expertise that keeps international talent engaged.

Whether you’re conducting due diligence on a target’s scattered global workforce or managing post-close integration across multiple jurisdictions, Pebl’s global EOR services and decade of compliance leadership ensure that workforce risks become manageable transitions instead of deal-breaking surprises. Get in touch to learn more.

This information does not, and is not intended to, constitute legal or tax advice and is for general informational purposes only. The intent of this document is solely to provide general and preliminary information for private use. Do not rely on it as an alternative to legal, financial, taxation, or accountancy advice from an appropriately qualified professional. The content in this guide is provided “as is,” and no representations are made that the content is error-free.

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