Strategies for Retaining Staff During Mergers and Acquisitions

When a company is going through a merger or acquisition, it can feel like the ship is rocking for employees. The uncertainty created by these processes can sometimes lead to talent jumping ship. Retention surveys from Mercer have shown that 20% of critical talent from the acquired organization leaves in the first three months after a deal, with another 20% leaving in the following 18 months.

It’s not just the top executives that need to be retained. Operations, technical, and sales leaders, as well as those involved in the M&A process, are crucial too. Charlotte Schaller, managing director of Aon’s Assessment Solutions UK and EMEA, emphasizes the importance of retaining managers and leaders who can navigate change with resilience, good communication skills, and empathy.

Financial incentives can help retain key individuals, but it may not be feasible to offer them to everyone. Guy Ellis, founder and CEO at HR consultancy Courageous Workplaces, warns against undervaluing the rest of the employees, as they are at risk of leaving or becoming disengaged. Executives often delay announcements until after M&A approval, focusing on their own roles rather than helping others.

To retain employees during M&A activity, financial tie-ins can be utilized. These can include performance-related bonuses, equity participation, or a combination of both. The amount and type of financial tie-ins vary based on factors such as region, industry, and business size. CEO’s can receive between 50% to 300% of their base salary, while other critical employees may get between 10% and 105%.

Cash bonuses are the most common form of financial incentives, but headhunters can lure employees away once the tie-in period ends. Equity stakes can be more effective but are costly and require legal negotiations. Whatever the incentive, it’s important to promise only what can be afforded. Tina Rahman, founder of HR Habitat, advises ensuring that bonus terms are clearly outlined in contracts to avoid potential challenges.

In addition to financial incentives, offering attractive employee benefit packages and incentives like flexible work arrangements can help retain talent, especially for younger employees. It’s crucial to value and retain all employees during M&A activity, not just the top brass, in order to maintain morale and productivity.