FALL/WINTER 2017-2018 | BWD 5
By Heidi Bolger, CPA/ABV, CM&AA, CGMA and Mary Van Skiver, CPA, MBA, PHR, CEPA
M&A TRANSACTIONS:
Five tips for retaining and engaging
executives and key employees
Whether you’re selling your business, acquiring a business,
or merging with another company, retaining and engaging
executives and other employees is a critical strategic move for a
successful transaction. Here are five tips for motivating your key
people, encouraging a high level of retention and engagement,
and preserving the value of your business.
1. Communicate. Communicate. Communicate. The period leading
up to a transaction’s closing is a time of uncertainty and may create a great
deal of anxiety. To ease concerns and maintain employee longevity, it’s
critical to communicate your plans as early as possible — to articulate the
vision and direction of the post-deal organization, and inform employees
of their roles during and after the transition.
2. Review existing financial incentives. Financial incentives are
critical to reduce employees’ fears and motivate them to continue their role
with the organization. Existing incentives may include severance pla ns or
employment agreements that provide executives and other key employees
with enhanced benefits if a change in control results in a separation from
employment. Additional elements such as “stay” bonuses and deferred
incentives are also powerful retention tools.
3. Offer “stay” bonuses and other benefits. Enhanced severance
benefits are like insurance policies — they protect employees in the event
they’re terminated after the deal closes. While severance makes it less risky
to remain with the company, it does little to discourage employees from
pursuing other opportunities. Stay bonuses range from 25 to 100 percent
or more of annual compensation with the highest percentages going to
those critical to the long-term success of the business. These bonuses
include cash payments — or, less frequently, equity awards — to employees
who remain on the job through closing or for a specified period following
closing. Bonuses may also be tied to the achievement of performance or
integration targets to motivate employees to continue their contributions to
the company’s value. Additional considerations such as extension of health
benefits, life insurance or other similar offerings may provide an additional
layer of confidence and engagement in the transition period.
4. Consider non-financial incentives. Non-financial
incentives can be as effective as financial ones in creating
engaged, committed employees. For example, you might
include employees in aspects of the acquisition, including
leading interesting projects, participating in trainings and
other career development programs.
5. Don’t exclude buyers. Although these incentives are
usually associated with sellers, buyers also have an interest in
retaining key talent along with their existing employees who
may also fear role elimination.
Know your employees.
The first step in designing an incentive program is to know
your employees and your business. Every company should
structure incentives based on their unique needs and
corporate culture. By understanding your staff and leadership’s
roles in the organization, supporting their career goals, and
addressing other areas of interest, incentive packages may be
provided that are commensurate with their expected value and
will likely motivate your employees to stay engaged and on
board for the long haul.
ABOUT THE AUTHORS
Heidi Bolger is a principal at Rehmann and consults with businesses in the areas of mergers and acquisitions,
strategy, succession planning and valuation. Contact Heidi today at [email protected].
Mary Van Skiver is a senior manager at Rehmann and plays a team lead role assisting businesses with the
design and implementation of transition plans while assisting them throughout the process. Contact Mary today
at [email protected].