Clifford Chance

Key pension issues on a takeover

4 September 2013

A takeover may be detrimental to a defined benefit pension scheme because it impacts on the ability of a sponsoring employer within the target’s group to meet its ongoing funding commitments to the scheme.  A bid may affect the sponsoring employer’s cash flow or balance sheet as a result of changes to the target’s dividend policy, intra-group arrangements or debt repayments. A highly leveraged bid is more likely to weaken the sponsoring employer’s covenant and at some stage have an impact on funding.

This briefing considers the role of pension scheme trustees during a takeover and whether the bid parties should seek Pensions Regulator clearance and also sets out an indicative pension issues timeline.

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