Keeping key staff is critical for a successful business acquisition

One of the biggest concerns for any business buyer undertaking an acquisition will be the retention of talent following a deal. Below we explore about the common concerns held by employees and how to best address these during and after a takeover deal.

The ‘trauma’ of acquisition
A successful business needs its key talent to flourish and buyers need to be aware that a change in ownership can cause a great deal of upset for staff members. For some employees, an acquisition can be traumatic. This can be for a range of reasons, for example some former airline employees described the impact of their company being sold to their arch rival. Some staff resigned immediately after being informed of the deal, as they did not wish to work for a company that they had viewed as an enemy for so long. Others described dealing with the aftermath of the deal as a ‘grieving process’.

Frequent concerns range from job security and future prospects, to losing valued colleagues. Staff are also likely to be worried that they will no longer have the same working patterns as they enjoyed under the previous owners, or that tailored benefits such as flexible working options will be lost. More frequent travel, or even forced relocation is also an obvious concern for some workers.

Dealogic’s recent data shows that the number of M&A deals is increasing, suggesting that a growing number of employees will be experiencing these kinds of concerns in the current climate. The number of global IT deals taking place so far this year is at its highest level since 2000. Healthcare is also going through a very active period for deals, particularly in the US where a record number of mergers and acquisitions (1,460 in total) took place in 2015.

When buying a business, it is both ethical and beneficial to you, as the new business owner, to fully consider staff concerns. A happy, fulfilled workforce is essential for success and there are measures you can take, as the buyer, to ensure staff are as content as possible this following a takeover deal. Below we look at some tried and tested strategies for retaining valuable staff and improving morale following a buyout.

Identifying the ‘real’ key players
It is easy to jump to conclusions about who the key players are within a business. Many focus on the so-called high flyers and those who are the most visible within the organisation. The key to identifying the ‘real’ key players is to task line managers and HR staff with working together to decide whose retention is critical. Instead of simply identifying senior executives and high-potential employees, consider workers who perform in a more average way but who hold skills that could be critical both during and after a deal. Those who move within certain social networks are also worth considering as critical, as keeping them sweet could prove invaluable to the retention of a vast number of other staff.

Management consultant McKinsey and Company advise that the list of key players make up around 30 to 45 per cent of your workforce. Of these, 5 to 10 per cent should be offered targeted retention measures. This approach can prove much cheaper than a general financial incentive plan, targeting all staff members. McKinsey and Company explains: “The key is to view each employee through two lenses: first, the impact of his or her departure would have given the focus of the change effort and his or her role in it; and the second the probability that the employee in question might leave.”

This process should be carried out as early in the deal process as possible - even as part of the due diligence process.

Tailored retention packages
Once the real key players have been identified, act fast and target these staff members with tailored packages to suit their priorities. You will often find that, after learning of a takeover, workers will fall into two categories with regards to their main concerns. One group, who are more family-oriented, may worry about relocating, extra travel time, changes to working hours and losing bonuses such as health insurance.

For this group, tailored retention packages can include financial aid such as a bonus payment, cash to help fund a relocation, and travel funding. However, money is unlikely to be the main concern and help finding school and nursery placements and the offer of remote working options may be more than enough to ensure this group remain loyal and fulfilled following a takeover.

The other group of key players are likely to be those who are more career-focused and for whom concerns about career progression, uncertainty about their role within the organisation following a deal, and changes to hierarchy and management will be at the forefront of their minds.

Sitting down with this group and talking through their roles at the business post-deal will have a significant comforting effect. Being open with regards to managerial changes - even telling them directly who their new boss will be - will also help to win their trust and increase their sense of security. Offering career progression and responsibility information in reference to the business’s future structure and strategy is another valuable tool. When packaged in tandem with financial incentives such as a rise in base pay and/or a bonus payment, this approach can result in a high level of retention in this career-focused group.

M&A specialist Towers Watson found that retaining staff after a takeover is similar in many ways to retaining staff generally. The firm’s M&A practice leader, Steve Allan, stated: “We know from our broad research with both employers and employees that retention has more to do with the nature and quality of the work environment than with almost anything else.”

Most important, perhaps, is deciding on a clear retention strategy and sticking with it. If you are working within a predetermined framework, you will find decisions can be made more quickly and your tailored response to staff concerns can be more agile. If you remember to listen to your new staff and offer retention packages to suit their individual concerns, you are likely to form strong relationships from the moment the deal is done.

M&A insurance: Are you covered?

How digital is creating a new M&A landscape

The butterfly effect: the value of cross-sector awareness in the M&A industry


Share this article



Latest Businesses for Sale

Supplier of Oil, Marine Fuels & Liquids
UK Wide

Bunker trader and supplier of marine fuels and liquids. Extensive network of global clients. Highly competitive prices ensure repeat custom for the long term. Significant potential to further expand operations and sales territory. Secure and steady f...

Asking Price: Offers Invited
Turnover: £13,000,000

Multi-Skilled Service Engineering Company
North of England, UK Wide

A multi-skilled service engineering company offering a bespoke service to the chemical, pharmaceutical, effluent and waste water treatment, aggregate, food and oil industries, including sales of new and refurbished centrifuges, filter presses, candle...

Asking Price: Offers Invited
Turnover: £410,000

FREEHOLD


Supplier of Fastenings & Fixings
Yorkshire and the Humber, UK

Provides a comprehensive range of high-quality fastenings and fixing products to multiple clients in the UK. Offers extensive solutions to customer issues and requirements. Offers invited.

Asking Price: Offers Invited
Turnover: £3,080,000

FREEHOLD



View more businesses for sale

Search Insights

Free guide: 10 Biggest Buyer Mistakes

Sign up to receive our acquisition alert emails to get your FREE guide

Email


Want access to the latest businesses for sale?

Business Sale Report is your complete solution to finding great acquisition opportunities.

Join today to receive:

  • Comprehensive range of businesses for sale
  • Make direct contact with business sellers or their intermediaries
  • Access to all UK administrations, liquidations and winding-up petitions
  • Daily email alerts for the latest businesses for sale & distressed notifications
  • Business Sale Report publication posted to you every month
  • Advertise your acquisition requirements on our "business wanted" section

All this and much more, including the latest M&A news and exclusive resources