April 23, 2021

Post-Closing: Dealing with “People Challenges” in M&A

This Willis Towers Watson memo discusses strategies that buyers can employ during the pre-closing period to deal with some of the “people challenges” they’re likely to face.  Here’s an excerpt:

Acquisition of skills and experience is often a stated deal objective, yet some buyers will wait until they have control to begin talent retention activities. The risk of people leaving begins as soon as the deal is announced. Therefore, an analysis of the retention plans in place by the seller (if any) is the first step.

The risk of people leaving begins as soon as the deal is announced.

Do the financial retention plans cover the period beyond Day 1? Usually they don’t, so the talent is at risk as you approach Day 1. Buyers can make conditional retention offers to talent via the seller that covers their future employment after Day 1.

What about non-financial retention activities? On the personal engagement and career aspiration side, this may be more difficult to achieve pre-close as sellers will restrict access to their talent. But the leadership teams can interact and the target’s leaders should be communicating the deal rationale and enhanced career opportunities available to their best people – crucial for you to keep people beyond the financial retention period.

Are you sure you have the right key talent? In many cases, we find that some key talent/roles within acquired organisations only become evident post-close. Keep some budget squirreled away to ensure you have something to offer after Day 1.

Other issues addressed by the memo include cultural integration, the challenges associated with buying a carve-out, and transfer of employees in asset deals.

John Jenkins