Tag archives: employee retention

Pension plan considerations in the M&A context

In any acquisition, whether for shares or assets, employee benefits and obligations must be taken into account. One of the potentially most onerous obligations includes the provision of pension benefits to employees – this makes it all the more important for companies contemplating acquisitions to consider potential employee pension plan implications.

In a share purchase context, the buyer will typically assume all liabilities of the target company, and if the target company has a pension plan in place, this will often be included. However, if there are significant pension fund deficits, this may be one reason an asset purchase agreement … Continue Reading

Change-in-control severance and its impact on key talent retention

boardroom-680x220As discussed in previous posts written by my colleagues Victoria Riley and Sara Josselyn, key talent retention is an important consideration for parties to a proposed M&A transaction. The uncertainty of a potential transaction may cause key employees to seek work elsewhere, which could in turn, jeopardize the deal itself. A change-in-control (CIC) severance agreement, however, is one mechanism that can be used by companies to allay concerns and prevent key talent departures.

CIC severance offers enhanced severance to key employees upon a change-in-control. The agreement must define what would constitute a “change-in-control”. Although this definition is … Continue Reading

Cultural compatibility: predictor of a transaction’s potential success

We have previously reported on human capital considerations in M&A transactions; in this post we consider how corporate culture affects a deal’s possibility of success. While qualitative considerations often sit on the backburner in the lead up to a deal, compatibility of corporate cultures can be an important factor in determining whether a merger or acquisition will be successful. According to a survey by Bain & Co., executives have indicated that the number one cause for a deal’s failure to achieve promised value is due to clashes in corporate culture.

Corporate culture is multifaceted and can include behavioural … Continue Reading

Human capital considerations in M&A transactions

In any M&A transaction, there are a variety of risks that are associated with human capital. Mercer has recently released a report, People Risks in M&A Transactions (the Report), based on a survey of M&A professionals. It provides an analysis of approximately 450 M&A transactions, and interviews corporate and private equity clients, investment bankers, and M&A advisors. The Report identifies a number of human capital risks that are of concern to those in the M&A sphere.

The top five issues relating to human capital identified by participants surveyed were:

  1. Employee retention: Retaining employees after a deal has taken
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How can companies retain talent during M&A?

Jimmy’s biotech company was doing well. A deal was on the table for a massive pharma conglomerate, Massive-Pharm, to purchase his company via an asset purchase agreement. Everything was going well, that is, until Jimmy’s top sales star, Terry, leveraged the impending purchase to secure a better-paying position at Jimmy’s competitor. After Jimmy’s company lost Terry, Massive-Pharm pulled the deal.

Believe it or not, Jimmy’s situation is not an entirely uncommon one in the M&A world. Purchase agreements often contain legal clauses allowing acquiring companies to back out of deals should the target company lose key employees prior to closing. … Continue Reading

Employee retention: good people equals better results

Light BulbHuman capital is a critical component of any merger or acquisition.  High profit margins and synergistic gains cannot be realized without key talent who are able to motivate employees to achieve high levels of performance. Although there is no simple solution to retaining top performers, retention strategies should be adopted in any merger or acquisition. The most common retention award offered to executives and employees is a cash bonus, calculated as a percentage of base salary.  Expressed relative to purchase price, retention budgets are quite minimal and are usually borne by the purchaser.

The Global M&A Retention Study conducted by Continue Reading

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