The Success of Multi-Billion Dollar Acquisitions Rests Heavily on Keeping
Key Talent for the Long-Term, Mercer Survey Finds
NEW YORK -- February 6, 2013
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
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 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
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
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