During pre-acquisition due diligence, Stone Capital Partners discovered that the target company had never been required to use E-Verify because the previous owner did not hold government contracts. However, the buyer's growth strategy centered on winning government work, which would require E-Verify compliance for the entire workforce. The existing workforce had been hired over a 10-year period with varying levels of I-9 documentation quality, and many employees had never had their work authorization verified through E-Verify. The buyer faced a critical decision: walk away from the deal, renegotiate terms to account for compliance risk, or develop a remediation plan before pursuing government contracts. Without resolution, the buyer could lose the ability to bid on this work or face penalties for non-compliance after closing.
Stone Capital Partners developed and executed a pre-close compliance strategy over eight weeks:
- Conducted a comprehensive I-9 audit of all existing employees to identify documentation gaps, errors, and potential work authorization issues
- Remediated deficient I-9 forms through legal correction procedures to bring historical records into compliance
- Registered the company for E-Verify and developed implementation procedures for existing and new hires
- Created a phased E-Verify enrollment plan that allowed the buyer to verify the existing workforce post-close without triggering mass disruption
- Trained HR staff and managers on E-Verify processes, timelines, and how to handle tentative non-confirmations
- Developed contingency plans for potential work authorization issues, including immigration attorney referrals and timeline management
- Prepared government contractor compliance documentation including policies, training records, and audit trails
The acquisition closed on schedule with a clear path to government contract eligibility. Within 90 days post-close, the entire existing workforce was successfully verified through E-Verify with no material work authorization issues discovered. The company was able to register as a government contractor and submitted its first proposal within four months of closing. The buyer noted that Stone Capital Partners' diligence uncovered a deal-breaking issue that the seller, previous accountants, and attorneys had all missed, and the structured remediation plan turned a potential disaster into a manageable transition.
