December 18, 2013

Companies That Successfully Retain Top Talent in M&A Start Early, Use Monetary and Nonmonetary Tactics

As noted in this Towers Watson blog:

While the vast majority of North American companies involved in mergers and acquisitions use retention agreements and “stay bonuses,” companies with more successful retention strategies identify who they want to keep and negotiate retention agreements earlier in the process than other companies, according to a recent Towers Watson survey. Almost three-quarters (72%) of successful acquirers determine which employees are asked to sign retention agreements either during due diligence or during the transaction negotiations, while just 36% of less successful acquirers do so at these early stages of their deals.

Other findings from the survey of 180 companies from 19 countries include the following:

– Retention bonuses are far more common in North America (reported by 83% of the respondents) than either Europe (56%) or Asia (40%).
– Most buyers use time-based “pay to stay” provisions in their retention agreements, typically stretching from stretching from one to two years post-close
– Retention efforts only go so far. Of employees who leave despite having retention agreements, respondents said that six out of 10 cite the deal itself as a primary reason for leaving.
– Retention isn’t only a buyer concern; 70% of sellers also used retention awards in the context of their deals.