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Retaining Talent During a Merger

September 30, 2022
Retaining Talent During a Merger

Mergers and acquisitions provide a wealth of opportunities for the companies involved. Both companies can leverage each other’s strengths to become a more powerful force. This win-win solution appeals to most business owners, but employees might not feel the same. Employees understand that companies will optimize roles, and some positions may inevitably become redundant. Here we address issues around employee retention after a merger or acquisition.

Assess the problem before it begins

As companies continue to turn to mergers and acquisitions as strategic growth avenues, it is essential that the impact on employees is assessed early on and minimized.

Often employees view mergers and acquisitions negatively because of the unknowns of this new combined entity. Without transparency and early communication, employees’ minds will wander around what may happen to benefits, roles, management, or job security. More often than not, the acquirer will want to take care of the most important asset it is acquiring – the people – and ensure an orderly transition.

When managers understand employees’ specific fears, they can better plan for them. Communication should start early on. Weekly calls, town hall meetings with the buyer, and anonymous drop boxes can all provide an avenue for employees to voice their concerns or ask questions.

Be clear about the investment decision

Mergers and acquisitions are significant, so people often wonder what the reason behind one is. Consolidating the market and turning a competitor into a partner might seem obvious, but there’s usually more. That company must also bring unique benefits to the table that make the merger or acquisition worthwhile. Some common reasons include:

1. The acquired company has a strong product or service that would benefit from being in the same market as the acquiring one.

2. There are economies of scale / cost savings by consolidating operations.

3. The new company has a loyal customer base that the acquiring company can tap into.

When you fully understand the main driving factors of your strategic decision, you can better relay that information to the broader team. Work closely with your communications teams to make sure your internal and external stakeholders understand the importance of this decision. This will help employees understand the bigger picture and not assume that it is not about headcount reduction.

Create a strategic staffing plan

The goal of a staffing plan is to be sure the company has the right people in the right roles at the right time. This is important during mergers and acquisitions because it allows you to retain top performers and avoid vacancies in critical roles. Here are some tips for creating an effective staffing plan:

Identify the skills and experience each position needs

Staff planning might require a comprehensive look at your current business operations and then predict how they might change. Next, consider the roles that will remain and the existing talent to fill them. You can then identify vacancies and even note potential candidates for these jobs. Finally, add the deadline for filling these roles. Keep an open mind about job titles and descriptions. They might change as the company transitions and grows.

Be flexible with compensation

Employees might feel more willing to stay if they believe they could receive higher compensation for doing so. This is especially true for top performers who might have other offers on the table. Take the time to review salaries and benefits to make sure they align with the market. You might also want to consider bonuses or stock options as an incentive to remain with the company.

Offer an incentive to reduce risk

Organizational change is not always predictable. You may later discover that roles you planned to keep have now become redundant. In the event that redundancies occur, and roles may need to be eliminated or consolidated, it is in the best interest of the company to offer desirable severance packages. Taking care of the people should be a priority.   

Open the lines of communication

Companies often focus on disseminating information, but they do not provide lines for two-way communication. It’s crucial that you allow employees to voice their concerns. This will enhance their buy-in and trust. Employees who have no say in business or strategic decisions feel less engaged and are more likely to leave.

Liaise with the new company’s HR department

Typically, the acquiring company does not lose workers at the rate the acquired company does. Consequently, the acquired HR department can play a strategic role in employee retention. These HR professionals know they likely will not retain all their workers, so you will need to build trust to get them on board and improve morale.

These professionals are in the best position to identify the talent your team needs. You can work with them to retain as many employees as possible since they’re in the best position to communicate new opportunities to their workers. These HR professionals can also structure succession plans and training to help move individuals into new roles. 

Prioritize transparency

Transparency can reduce and ease anxiety. If employees know exactly what to expect, they can make informed decisions. Companies achieve transparency when they share information about the decision, the expected timeline, and what it means for employees. You should also be clear about job descriptions, compensation, and benefits.

The more information you can share, the better, but companies should be careful not to bombard employees. Only share information that is certain and unlikely to change in the near future. Flipflopping on decisions can trigger high levels of anxiety. Workers may then try to mitigate those risks and look elsewhere for employment.

Hire professionals to streamline the process

At Persient, we built our entire business model around helping companies achieve seamless transitions during mergers and acquisitions. We take a holistic approach. Our team looks beyond business valuation to determine the landscape of the new business and how well it blends with your own. That knowledge provides what you need to make more informed decisions about how to move forward with the process.

Are you ready to see what our strategic approach can accomplish for your business? Learn how the value of your business (or even your business talent) can translate into more by requesting a Business Landscape Assessment or schedule to meet us in our San Diego office.

Investment banking services and securities offered through Independent Investment Bankers Corp., a registered broker-dealer, Member FINRA / SIPC. Persient LLC and Independent Investment Bankers Corp. are not affiliated entities. FINRA Broker Check.

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