401(k) Plans in Stock Purchase M&A Transactions: A Buyer’s Guide to Choosing Termination or Merger

Morgan Lewis – So you’re a government contractor thinking about acquiring another contractor. Here’s something you need to think about: What are you going to do with the 401(k) plan of the target company? Should you require the target to terminate the 401(k) plan prior to closing? Or should the target keep the 401(k) plan in place for a short period of time following closing and then merge it with you plan? While many of these decisions may be driven by the administration and payroll processes in place, what are the pros and cons and other considerations to keep in mind with terminating versus merging a target’s 401(k) plan?

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