November 15, 2023

The Stats on Special M&A Synergy Awards

Here’s my recent post on The Advisors’ Blog on regarding M&A synergy awards:

WTW’s Global Executive Compensation Analysis Team recently conducted a study of the 100 largest U.S. mergers from 2018 to 2022 focused on the use of special synergy awards. Of the companies surveyed:

– 14% granted special synergy awards to NEOs

– Of that 14%, 5% granted special synergy awards to NEOs and had synergy goals in their STI programs

– 23% only included synergy goals in their STI programs

The WTW team stressed that these special awards are only appropriate in limited circumstances — the annual executive compensation package should generally provide sufficient alignment with long-term strategy. When used, the disclosure of these awards needs to clearly articulate their purpose and highlight that they are non-recurring. With respect to the circumstances and structure of these awards, when used:

– 79% were granted in mergers that exceeded the median deal value of the survey ($13.8 billion)

– They were typically in the form of PSUs, but performance shares, performance stock options, performance cash awards or a combination were also used

– The vesting periods were typically between three and four years

– 57% included synergy and financial goals and 43% used only synergy goals (cost reduction or revenue improvement)

– Meredith Ervine