Talent Retention Effort in Mergers and Acquisitions Must Start Early Says Towers Watson
The survey, conducted earlier this year, included 180 companies from 19 countries and focused on current retention practices as well as specific tactics used by those companies that the survey identified as more successful in keeping top talent. The survey finds that companies with successful retention strategies identify which employees they want to target for retention agreements early in the process. Almost three-fourths of successful acquirers (72 percent) determine which employees are asked to sign retention agreements either during the due diligence stage or during the transaction negotiations, which is twice the number of less successful acquirers (36 percent) that ask employees to sign agreements during either of those times. Nearly six in 10 (58 percent) of less successful companies don’t ask employees to sign agreements until after the transaction closes, Towers Watson says.
Among the key survey findings:
- Retention agreements are the primary retention vehicle — used by 84 percent of acquirers and 70 percent of sellers — with retention bonuses the cornerstone of this approach.
- Roughly two-thirds to three quarters or more of both buyers and sellers use agreements, chiefly for senior leaders below the boardroom level, key contributors and technical experts.
- Retention bonuses are far more common in North America (reported by 83 percent of respondents) than either Asia (40 percent) or Europe (56 percent). Personal outreach by leaders to retention targets shows a similar pattern across the regions.
- 90 percent or more of buyers across all three regions use time-based “pay to stay” provisions in their retention agreements, typically stretching from six months to one year post-close.
- Performance-based metrics are less common, but in use at roughly half the acquiring companies across the regions, with nearly twice as many (74 percent) using individual performance goals as using organization-wide performance goals (38 percent).
- Retention efforts can only go so far. Respondents said that of those employees who leave the organization despite having retention agreements in place, six out of 10 cite the deal as one of the primary reasons for leaving.