Success of mergers, acquisitions hinges on retaining key talent: Mercer

Retaining key talent is top of the mind for organisations engaged in mergers and acquisitions (M&A) as it often directly impacts the overall success of the deal. 

This has been revealed in a Mercer survey on M&A Retention and Transaction Programs. The survey shows that the success of multi-billion dollar acquisitions rests heavily on keeping key talent for the long-term.

Mercer is a wholly-owned subsidiary of Marsh & McLennan Companies, a global team of professional services companies offering clients advice and solutions in the areas of risk, strategy and human capital.

The survey examined the extent to which the two main tools for retaining critical talent — retention incentives and transaction bonuses — are used. According to Mercer, retention incentives, which are designed to keep employees through or after deal closing, are widely accepted means of talent retention.

Transaction bonuses are typically paid to CEOs, executives and deal team members, and are used less frequently.

The type of retention incentives used depends primarily on the type of deal and also varies from country to country. The US and Canadian organisations provide larger retention incentives than organisations in Europe and the Asia-Pacific when viewed as a percentage of base pay, the survey showed.

CEOs and other executives in European and Asia-Pacific organisations are more likely to receive transaction bonuses than their counterparts in the US and Canada, the survey showed. Also, European organisations offer deal team members transaction bonuses, while none of those surveyed in the Asia-Pacific provide transaction bonuses to deal team members, it revealed.

“There is no one-size-fits-all retention incentive programme,” said Ake Ayawongs, Mercer’s M&A business leader, Growth Markets (Asia/ Middle East/Turkey/Africa).

When companies adopt a retention programme, executives critical to long-term success are eligible for retention incentives in 70 per cent of the programmes, compared to employees for the short-term success of the integration who are eligible in just 53 per cent of the programmes, the survey shows.

Moreover, the use of retention incentives is even higher for organisations conducting cross-border transactions — 80 per cent for executives critical to long-term success and 60 per cent for employees for the short-term success of the integration.

The survey analysed information from 42 organisations actively engaged in M&As around the world. The survey reflects detailed information on the retention and transaction programmes implemented in over 70 deals completed by these organisations in the past three years.

According to survey findings, almost two-thirds (62 per cent) of deals completed by participating organisations over the past three years used retention programmes. Typically, organisations determine whether a retention programme is necessary early in the due diligence process, then determine eligibility as the close of the deal approaches, it says.

According to the survey, 42 per cent of executives other than the CEO are most often targeted for a transaction bonus. Organisations in 33 per cent of deals provide transaction bonuses to deal team members, while slightly fewer (31 per cent) provide them to the CEO. Other employees were less likely to receive a transaction bonus.