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Immigration Breakdown: Don’t Overlook Immigration Issues When Acquiring a New Business

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In many transactions, a significant part of the value to the buyer of a company is the people working for the company. What if the deal closes, however, and some or maybe many of those people are no longer available to work for the buyer?

When companies acquire new businesses, immigration issues often get little attention in the due diligence process, which can lead to unpleasant surprises down the road. In the most recent fiscal year, the United States Immigration and Customs Enforcement Agency (ICE) conducted nearly 7000 worksite investigations — a fourfold increase from the prior year — and nearly 6000 audits of I-9s — a fivefold increase from the prior year.

At a minimum, if your company is thinking about buying another company, it should conduct an audit of that company’s I-9s and immigration compliance policies. For existing employees, this is not an arduous process; it mostly entails reviewing I-9s and accompanying identification verification documents to ensure their completion and compliance with federal and state law. Additionally, as a purchaser, you will need to decide whether you will continue to rely on the seller’s existing records, or whether you will treat the seller’s employees as new employees and complete new I-9 forms for each of them.

But perhaps the biggest “eleventh hour” surprise that some buyers encounter is that they may not be able to continue to employ some of the talent that they were counting on retaining. For example, a manager or an employee with specialized knowledge about the seller’s products, research, or techniques who is working on an intracompany (L-1) visa, will not be able to continue working for the buyer after the transaction is completed. And while H-1B visas can usually be transferred to the new employer, it can take some time and there is no guarantee that the U.S. Citizenship and Immigration Services’ (USCIS) reviewing a transfer petition that is nearly identical to one submitted several years ago would reach the same decision. If one of the reasons you are buying a company is because of its foreign talent, then your due diligence should focus on immigration issues from the outset.

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This information is provided by Vinson & Elkins LLP for educational and informational purposes only and is not intended, nor should it be construed, as legal advice.