Unless you’re a grandparent showering gifts on the grandkids, you can’t buy loyalty (besides, deep down grandparents know gifts don’t guarantee devotion). The same goes when retaining valued leaders during a merger or acquisition.
Winning “hearts and minds” of key personnel – an absolute necessity in maintaining or growing deal value – goes far beyond the traditional approach to compensation-only retention plan design, typically a one- to three-year cash payment plan that focuses on equity, deferred proceeds, holder agreements and retention funds.
While financial incentives play a leading role in a talent retention strategy, a holistic approach is more effective especially during any period of uncertainty or change, the hallmarks of a merger or acquisition. But it’s more important now amid the uncertainty and fluidity in the job market.
While some deals are pure asset purchases, most deals we work on feature acquisition of the intangible: intellectual capital, skills and experience—not to mention potential—of an organization’s leadership. People are a critical asset in these transactions and retaining key employees enables deal success. Monetary or contractual retention should be one of many levers.
One of our clients, a technology company, has found that non-monetary retention has long-lasting payoffs. Basically, it approaches retention as an insurance plan.
It is common that the leaders of the target will most likely not be leaders after the acquisition. To engage them, you should instill excitement about joining the acquiring company.
During a recent M&A roundtable, an HR executive at the tech company shared the integration retention steps they follow. These include:
Combined, these steps foster cultural alignment, encourage skill building, and advance integration objectives.
What do acquired leaders want? It turns out they want a lot of the same benefits other employees want, including
There certainly are challenges in delivering non-monetary advantages, including extensive advance work and potential difficulties in execution. However, several of our roundtable participants enthusiastically confirmed that the lasting loyalty engendered when it’s done right has enormous benefits, far beyond the retention of desired executives and the legacy knowledge they provide.
The overarching goal is to deter leaders from trying, either consciously or subconsciously, to “break” all the great things that made the acquired company so attractive in the first place. And to, hopefully, instill the feeling that their work lives, and the work lives of their employees, have improved since the acquisition.
