The Success of Multi-Billion Dollar Acquisitions Rests Heavily on Keeping Key Talent for the Long-Term, Mercer Survey Finds
07 2월 2013 - 1:13AM
Business Wire
For organizations engaged in mergers and acquisitions, retaining
critical talent is top of mind since it often directly impacts the
overall success of the deal. According to Mercer’s Survey of
M&A Retention and Transaction Programs, when companies adopt a
retention program, executives critical to long-term success are
eligible for retention incentives in 70% of the programs, compared
to employees for the short-term success of the integration who are
eligible in just 53% of the programs.
Moreover, the use of retention incentives is even higher for
organizations conducting cross-border transactions – 80% for
executives critical to long-term success and 60% for employees for
the short-term success of the integration.
Mercer’s survey examined the extent to which two main tools for
retaining critical talent -- retention incentives and transaction
bonuses – are used. According to the findings, retention
incentives, which are designed to keep employees through or after
deal closing, are widely accepted means of talent retention while
transaction bonuses, which reward employees for the work undertaken
during a transaction, are used less frequently.
“Organizations must first review their acquisition strategy to
determine if a retention incentive plan is needed to protect
against critical employee flight risk. If so, key design
considerations include which employees should participate, how much
they should be awarded, payout timing and structure, performance
conditions, and finally, overall plan cost,” said Chuck Moritt,
Senior Partner in Mercer’s M&A consulting business.
Mercer’s Survey of M&A Retention and Transaction Programs
analyzed information from 42 organizations around the world
actively engaged in mergers and acquisitions to better understand
the tools used to retain critical talent. The survey reflects
detailed information on the retention and transaction programs
implemented in over 70 deals completed by these organizations in
the past three years.
Retention Programs
Retention programs focus on retaining executive and senior
management critical to the integration process. According to survey
findings, almost two-thirds (62%) of deals completed by
participating organizations over the past three years used
retention programs. Typically organizations determine whether a
retention program is necessary early in the due diligence process,
then determine eligibility as the close of the deal approaches.
The type of retention incentives used depends primarily on the
type of deal. For example, organizations are more likely to provide
retention incentives when involved in an acquisition than a
divestiture. More than half (57%) of organizations reported that
executives critical to long-term success are always eligible for
retention incentives. However, for a typical divestiture, only 44%
reported that these executives are always eligible.
Retention incentives also vary from country to country.
According to the survey findings, US and Canadian organizations
provide larger retention incentives than organizations in Europe
and Asia Pacific when viewed as a percentage of base pay.
“There is no one-size-fits-all retention incentive program,”
said Gregg Passin, Partner and Mercer's US Leader for Executive
Rewards consulting. “While many of the plans share certain
characteristics, retention plan design varies based on deal size
and complexity, type of deal, industry sector and whether the
transaction is cross-border. When organizations develop their
strategic retention bonus program, it’s critical to look beyond
market benchmarks to examine their own unique needs.”
Transaction Bonus Programs
Transaction bonuses are typically paid to CEOs, executives and
deal team members. Forty-two percent of executives other than the
CEO are most often targeted for a transaction bonus. According to
Mercer’s survey, organizations in one-third (33%) of deals provide
transaction bonuses to deal team members, while slightly fewer
(31%) provide them to the CEO. Other employees were less likely to
receive a transaction bonus.
Additionally, the survey found that CEOs and other executives in
European and Asia Pacific organizations are more likely to receive
transaction bonuses than their counterparts in the US and Canada.
Also, European organizations offer deal team members transaction
bonuses, while none of the organizations surveyed in Asia Pacific
provide transaction bonuses to deal team members.
While transaction bonuses as a percentage of base salary for
deal team members are fairly consistent among companies in the US
and Europe, companies in Europe provide much smaller transaction
bonuses to CEOs and other executives than companies in the US.
Transaction bonuses are typically paid only if the deal closes.
About Mercer
Mercer is a global consulting leader in talent, health,
retirement and investments. Mercer helps clients around the world
advance the health, wealth and performance of their most vital
asset – their people. Mercer’s 20,000 employees are based in more
than 40 countries. Mercer is a wholly owned subsidiary of Marsh
& McLennan Companies (NYSE: MMC), a global team of professional
services companies offering clients advice and solutions in the
areas of risk, strategy and human capital. With 53,000 employees
worldwide and annual revenue exceeding $11 billion, Marsh &
McLennan Companies is also the parent company of Marsh, a global
leader in insurance broking and risk management; Guy Carpenter, a
global leader in providing risk and reinsurance intermediary
services; and Oliver Wyman, a global leader in management
consulting. For more information, visit www.mercer.com. Follow
Mercer on Twitter @MercerInsights.
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