Merger and Acquisitions (M&A) used to mean very little to the average person on the street; it formed the backdrop of movies like Wall Street and Trading Places. They even dedicated a movie to the subject, Mergers and Acquisitions, which apparently was quite good.
But, despite us knowing about the idea of M&A and that it happened a lot at the box office, it didn’t really form the fabric of our lives; it was activity that was consigned to dusty boardrooms and big conglomerates.
But, along come the 90s dot com boom and the Nasdaq, and then M&A speculation and IPO announced itself on the doorstep of the average joe. Soon, many of us were working for a company that might be bought (or float) or we knew someone in this predicament. Suddenly, the average Joe couldn’t get enough of M&A and IPO.
Two decades later in 2012, the average Joe’s interest in M&A and IPO has only strengthened; we are in a boom time of high profile acquisitions of smaller fish. For example, in just the first half of this year Microsoft bought Yammer, Salesforce bought BuddyMedia, Google bought Meebo and Wildfire, Facebook bought Instagram, face.com and glancee, LinkedIn and others bought Digg, Amazon bought Kiva Systems, Twitter bought Posterous, and Zybga bought OMGPOP.
I am sure that Facebook would agree that M&A is pretty much in our face these days and is firmly in the face of HR professionals who must deliver talent management strategies to help guide their companies through successful M&A and IPO.
In fact, research from Aon Hewitt suggests that approximately 10 percent of an M&A deal’s value was riding on the rate at which critical employees separated during or immediately following the deal completion.
But, they also found that 78 percent of the companies surveyed said they have not met or exceeded their goals in past M&A transactions and one of the chief reasons cited for not meeting those goals was an inability to retain key staff during the merger.
So, staff retention is a critical issue during M&A – and with there being an abundance of known takeover targets in 2013 – staff retention during M&A is set to be a key, albeit contingency skill for HR practitioners over the coming year (s). So, I thought it would be a good time to summarize five key strategies that HR can adopt to help maximize staff retention during a merger.
1. Retention Agreements: Research from Towers Watson of over 180 companies from 19 countries has found the companies who were most able to hold on to key employees during a merger used retention agreements, with 92 percent providing a cash retention bonus on closing of the deal at 6 months and 12 months after the deal closed.
2. Identify employees early in the process: The Towers Watson analysis also found that the companies that were most successful at retaining employees during and post M&A engaged with their employees early in the process; with 72 percent of the most successful acquirers getting employees to sign retention agreements either during due diligence or transaction negotiations, compared to just 36 percent for less successful acquirers.
3. Use selectively: More than two thirds of companies just focus their retention bonuses in on senior leaders below boardrooms, key contributors and technical experts.
4. The human touch is a great retention agent too: While money is very important to retention, the Tower Watson survey also found that 74 percent of the most successful M&A companies used personal outreach by managers and leaders, while only 24 percent of less successful companies used the human touch.
5. Communication and Harmonizing culture: 75 percent of leaders interviewed as part of Mercer’s Transatlantic Study agreed that “communicating with employees” and “harmonizing culture” were the key factors for post merger integration. A separate Towers Watson study into the insurance industry found that the firms that were most successful at retaining talent, during and following M&A, clearly communicate both the rationale for the merger and the strategic direction of the new company.