Majority of Global Dealmakers Use Financial Incentives for Talent Retention, but Prevalence Varies - Mercer Research
27 6월 2017 - 10:00PM
Business Wire
- 7 in 10 use financial incentives for
talent retention in M&A transactions, often well beyond
executives and senior management
- US (76%) second highest prevalence
level after Japan (89%)
- Tech industry buyers fund retention
plans for CEOs and direct reports on average at 49% above the
market median
- Research uncovers retention
framework
Utilizing retention programs in order to maximize the enormous
‘people investment’ made by global dealmakers is a nearly
ubiquitous practice, according to Flight Risk in M&A: The Art
and Science of Retaining Talent – 2017 Mercer Research Report. More
than 7 in 10 dealmakers (71%) the world over say they use financial
incentives for talent retention as part of their deal-making
strategy and process. The research revealed, however, that
regional, cultural and industry dynamics vary widely, and
understanding and leveraging these variances are crucial to
long-term deal value.
“In taking a broad view of M&A worldwide, we see buyers
flush with cash paying record multiples in order to complete
transactions,” said Jeff Cox, Mercer’s Global Transactions Services
Leader. “The common denominator in this activity is having the
right people on board in order to drive superior operating
performance. Our research includes a ‘best-in-class’ retention
playbook for structuring financial incentives for talent retention
programs that are time sensitive, affordable and competitively
aligned.”
The Flight Risk in M&A survey findings are based on
responses from 243 corporate executives and private equity deal
professionals involved in global transactions and 82 in-depth
interviews. Most firms (69%) represented by respondents had 5,000
or more employees, and 77% had annual global revenue exceeding $1
billion. The research was triggered by the recent Mercer People
Risks in M&A Transactions report which found that “employee
retention” was the primary perceived risk for global
dealmakers.
Not just for the C-Suite
One significant trend that the Mercer research revealed is that
talent retention programs are expanding below the C-suite. In fact,
when asked about retention bonus eligibility outside of senior
management and the C-suite, 70% listed “other employees critical
for integration” and 35% listed “other employees regardless of
critical for integration.” This last figure is up 150% from the
level found in Mercer’s related research report published in
2012.
“Buyers and sellers are getting more sophisticated and nuanced
about who they offer retention to and how deeply and broadly to go
into the acquired organization,” said Mercer’s Gregg Passin, Senior
Partner and North America Executive Rewards Practice Leader. “It is
also important to differentiate between short-term cash payouts and
longer-term equity awards. Well-designed and implemented retention
programs are more commonly being viewed as a type of ‘insurance’ to
help better ensure that the maximum value is derived from a given
transaction.”
The “where” matters
Mercer’s look at global talent retention practices revealed that
the location and industry of a given transaction can greatly
influence talent retention practices and assumptions. These norms
need to be understood and taken into account so as to avoid talent
flight but also to ensure the right level of expenditure. In terms
of industry, buyers and sellers need to be aware of certain
industries that pay out financial incentives that vary greatly from
the norm. For example, in the technology sector, buyers fund
retention plans for all levels on average at 49% above the market
median. From a geographic and business/cultural perspective:
- United States – Foreign buyers
often feel they must ‘overspend’ on talent retention in order to
compete against domestic acquirers – especially if the domestic
rival is publicly listed and can offer equity as part of the
program. This need to overspend is also driven by the fact that
typically retention bonuses and payouts are the most generous in
the world, no matter where the acquirer is located, and the second
in the world in prevalence (76%) behind only Japan.
- Canada – Buyers often feel that
the talent retention program in the US should cover all of North
America – this is a mistake. Canadian payouts tend to be much more
modest and therefore a distinct Canadian program should be
developed that relies on local benchmarks and talent assessments.
Prevalence is also much lower than in the US (63% versus 76%) but
still common.
- UK & Europe – European
buyers are slightly less inclined than American buyers to offer
financial incentives (67%). Among European buyers, 41% are offering
retention bonuses to employees outside of senior management who are
critical to the company’s long-term success — those with key client
or supplier relationships or with knowledge about essential IT
systems.
- Asia – Across Asia, buyers
clearly see the need to use financial incentives, particularly for
deals “outbound” from their home markets (94%). A good example is
Japan, where 89% of buyers report offering retention
programs, the highest single-market prevalence level reported.
Acutely aware, however, of their shortage of management skills
outside of the domestic market, Japanese buyers tend to retain
local management in overseas acquisitions for at least one to three
years. This singular focus on senior management is important, but
it can obscure the long-term retention goal of identifying and
developing future leaders.
Mercer’s talent retention framework for deal makers
Based on its involvement in more than 1,200 transactions in any
given year, Mercer has leveraged this experience and insight from
this research to develop a retention framework. This framework
helps companies navigate the four main components of building the
right retention program.
To download an executive summary of Mercer’s Flight Risk in
M&A report, please visit www.mercer.com/retention. The full
report can be purchased at
https://www.imercer.com/products/ma-retention.aspx.
Mercer will host a webcast to discuss the research results on
June 29, 2017 1-2 pm eastern. Members of the media are invited to
attend. Please register here.
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 careers of their most vital asset –
their people. Mercer’s more than 20,000 employees are based in 43
countries and the firm operates in over 140 countries. Mercer is a
wholly owned subsidiary of Marsh & McLennan Companies (NYSE:
MMC), a global professional services firm offering clients advice
and solutions in the areas of risk, strategy and people. With
annual revenue of more than $13 billion and more than 60,000
colleagues worldwide, Marsh & McLennan Companies is also the
parent company of Marsh, a leader in insurance broking and risk
management; Guy Carpenter, a leader in providing risk and
reinsurance intermediary services; and Oliver Wyman, a leader in
management consulting. For more information, visit www.mercer.com.
Follow Mercer on Twitter @Mercer.
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MercerBruce Lee, +1 212-345-0553bruce.lee@mercer.com
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