If you’re in the midst of a merger, acquisition, or significant business transformation, you’re likely trying to figure out how to hold onto key talent.
M&A activity can lead to uncertainty and a significant ‘shake up’ within all companies involved. It can be a jarring time when employees begin to feel unsure of their value, position, and start to question their job security. They also wonder whether it’s worth staying with the acquiring company – one that is almost always much larger than the selling company. 20% percent of employees voluntarily leave the company soon after a merger announcement. This is unfortunate because, often, the acquiring company offers more stability, better pay, and a wider set of initiatives to work on. So, why not give the buyer a chance?
Companies address these issues with a retention pool (cash and/or stock) to encourage employees to stick around. Most retention pools during an M&A set aside capital to retain employees and that money is delivered to those employees once the desired retention period has been met. However, you may very well lose those valued employees during that lengthy vest period – and that retention plan then goes out the window. Consequently, many buyers will negotiate with the selling shareholders to increase the size of the retention pool, which comes at a cost to the investors (decreasing the price paid for the company).
Buyers often, also, split the retention money for an employee – providing some portion sooner than the buyer would like just to make sure employees stick around. In other words, all sides of this equation – buyers, sellers and employees – end up a little miserable.
However, there’s a solution that has never, to my knowledge, been leveraged. A solution that increases the value of a retention pool without increasing the amount of the retention pool.
The solution: vesting cash retention.
What is it? Employers provide employees with the retention amount on the closing date but with a legal requirement to pay the bonus back if the retention period is not met. At Keep, we have cracked this code and created a structure that works for all parties.
Providing employees with access to retention funds now allows them to celebrate the transaction, accomplish personal financial goals that might have been unattainable for years, and demonstrates the employer’s trust, investment, commitment, and desire to make the employee a permanent part of a buyer’s team.
Find out how Keep can help you retain (and attract!) quality employees during transformation at keepfinancial.com