What is HR's strategic obligation if massive hidden liabilities are discovered during the M&A due diligence phase?

• A. To escalate to marketing for brand alignment.
• B. To increase the offered price to close the deal.
• C. To advise executive leadership of the true Cost and Risk Assessment, which may result in lowering the purchase price or killing the deal entirely.
• D. To ignore the liabilities and proceed.

Answer: (C)

Identifying hidden liabilities in M&A due diligence requires HR to provide a transparent, risk-focused assessment of people-related costs and risks to the business, and to escalate that information to executive leadership so they can decide how to proceed. When undisclosed HR liabilities—such as underfunded benefits, large severance obligations, onerous employment contracts, misclassification risks, potential wage-and-hour issues, or culture and retention challenges—are uncovered, the true cost and risk must be laid out clearly. This enables leaders to make an informed decision about the deal’s value and feasibility.

The reason this is the best approach is that it treats people risks as a strategic and fiduciary matter. Leadership needs an accurate picture of what post-close integration will require, what liabilities will fall to the acquirer, and how those factors affect price, indemnities, or even whether to walk away. By presenting the true Cost and Risk Assessment, HR helps calibrate the deal—potentially lowering the purchase price, inserting protections or indemnities, or deciding not to proceed—so decisions aren’t made on incomplete or overly optimistic information.