Private equity firms entering into an acquisition look to identify material human resource risks early in the due diligence process. The financial risks associated with human resources may have a significant impact on the valuation and ultimate purchase price the buyer is willing to pay for the target company.

However, it would be shortsighted to focus only on financial risks. The assessment of management talent and navigation of human resource transition challenges will drive the success and economics of the portfolio company during private equity ownership, and are therefore instrumental in maximizing the buyer”s ultimate return on investment.