M&A retention agreements have gotten smarter, more strategic, WTW says
- In Willis Towers Watson's (WTW) 2017 Global M&A Retention Study, 80% of the respondents said that talent retention agreements helped keep employees on board during their organization's acquisition or merger (M&A). The study examined retention agreements' use, structure and effectiveness during M&As, with a focus on the financial sections in the agreements. Retention increased 10% since the 2014 study.
- Successful organizations undergoing M&As personally reached out to talent and offered enhanced professional opportunities along with retention agreements to get them to stay, WTW said. Candidates most likely to receive retention agreements are senior executives (54%) and employees below the executive level with skills critical to the transition (55%).
- WTW recommends that organizations start the retention process by focusing first on senior executives who are charged with leading the pre-close transaction to conclusion, and getting them aligned with the acquisition's strategies and goals. WTW also recommends that companies identify essential non-executive staff, offer cash and other awards to retain key employees and balance pay-to-stay with pay-to-perform practices.
The importance of retention during M&As often gets lost in discussions about negotiations between buyers and sellers and the cost of the sale or buy-out. But the real success of M&As comes months after the transaction is complete, when the leadership and remaining employees return to a new normal.
HR has the monumental task of managing talent before, during and after an M&A. That makes identifying employees to retain and engaging them to ensure retention is essential. High-performers, who are most likely to be offered retention agreements, can find employment elsewhere, especially in a tight labor market when competition for talent is highest.
Also, mere rumors of an M&A can get employees to start thinking about job-hunting. Therefore, employers need to identify the talent they want to retain as early in the M&A proceedings as possible, and keep communication with all employees strong to prevent rumors and discontent.