Staying Power: How to retain key employees during the M&A process

Part 1 of a series

Nothing can turn a sweet M&A deal sour faster than a key employee leaving the company before the transaction is final. This kind of loss can reduce a company's selling price, hinder integration plans, turn a star executive into a formidable competitor and even shut down a deal altogether. But bonus plans and other incentives can motivate key employees to stay and help reduce the odds that this common M&A mishap will happen to you.

AN OFFER THEY CAN'T REFUSE

Companies increasingly are using bonus plans to retain vital staff through transitions and help motivate continued productivity after a merger. Common bonuses include:

Retention - These "stay" bonuses typically are offered by the selling company to retain experienced and knowledgeable staff during the integration process. They usually are provided to executives but can also be used to retain other key employees, such as top salespeople or key product developers, who add value to an M&A deal.

Most retention bonuses are awarded as a percentage of salary or a lump sum amount. But they may also take the form of:

n             Stock or stock options,

n             Flexible working hours or extra vacation time,

n             A change in responsibility, work flow or assignments, or

n             A better severance package if the employee will be employed for only a limited time.

Retention bonuses typically are offered to between 5% and 10% of the employees of the overall company or division being acquired.

(to be continued)