towerswatson ma brochure

Navigating to M&A Success A Guide to the What, When and How of Effective Deal Making

Towers Watson Navigating to M&A Success: A Guide to the What, When and How of Effective Deal Making

Finding What You NeedAn Introduction to Our M&A Services

The Significant Seven

Explore by Deal Time Frame

Organizational Readiness

Due Diligence

Integration Planning

Implementation

Explore by Deal Type

Domestic

Cross-Border and Emerging Markets

Spin-Offs, Divestitures and Joint Ventures

Partnering With Towers Watson

Insurance M&A Services

Global Reach

M&A Tools

2


While it’s impossible to predict the movement of the global economy over the next few years, it’s a safe bet that deal making will continue as a time-tested way for companies to refocus, sometimes retrench and ultimately grow more profitably. It’s an equally safe bet that the risks of deal making will also increase, given the mounting complexities of managing in a highly interconnected, technologically sophisticated global environment. All this puts more pressure on business leaders to quickly demonstrate a deal’s financial and operational value.

Deal success always begins with the right strategy and transaction goals — whether for acquisition, merger, spin-off or divestiture. But ultimately, realizing a deal’s value by any chosen metric comes down to how well the strategy is executed.

Over the years, Towers Watson has been involved in thousands of deals, helping M&A teams conduct effective due diligence before closing and then plan, integrate and implement post-close. We have a deep bench of global experts, and considerable experience on the ground with virtually every type of domestic or cross-border transaction across geographies and industries.

We know what works. More importantly, perhaps, we know how to identify and handle the challenges and obstacles that inevitably arise — from struggles to retain key talent, to different agendas among organizational functions, to building an aligned leadership team, to integrating cultures, to helping affected employees cope with uncertainty.

We’ve created this deal navigator to help you find the information you need quickly and easily — whether to prepare for an impending transaction or address an ongoing situation. You can navigate by the phases of the typical deal process or by the type of deal. Throughout, you’ll also find references to what we call the . These are the seven areas of critical value that can make or break a deal’s success from an operational and workforce standpoint. They cut across every type and phase of a deal, and should form the core of your plan for integration and implementation.

Welcome to the fast-moving and ever-changing world of M&A.

Mary Cianni, Global M&A practice leader

ofFront LinesDeal Making

From theLessons

An Introduction to Our M&A Services





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

3






Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

SignificantSeven

The

There are seven areas that materially affect the success of a deal. They come into play in virtually every type of deal and at every stage in the M&A life cycle to greater or lesser degrees, but they can’t be ignored or given short shrift at any stage. Explore each area to see what’s involved and how Towers Watson can help.

Keys Deal Success

to

The

4


Explore by Deal Time Frame • Organizational Readiness

• Due Diligence

• Integration Planning

• Implementation





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

5


Organizational Readiness The work required to close a transaction is significant and varied. Given the increased complexity of deals today, even experienced deal makers may not always have the skills, resources or time required to execute deals effectively and on schedule. New or occasional deal makers often struggle to determine the most efficient processes and find people to get the job done.

Towers Watson research and client experience confirm that deals are concluded more successfully when HR addresses people and culture issues early, strategically and with discipline. Our well-tested and rigorous readiness process can equip your HR team — even a novice group — to handle the entire process, or we can provide a refresher in key areas. We assist across the spectrum of activity, helping your team:

• Evaluate the strategic deal rationale and fitness of potential candidates — including their workforce and culture, leadership styles, talent management programs, cultural and communication styles, and HR and related workplace programs and practices that could affect integration • Assess potential costs and risks — including the total cost of the target’s compensation, pension, health care, retiree medical, and related workforce and reward programs • Identify and prepare your staff to address the full range of integration issues — from identifying leaders and retaining key talent, to harmonizing workplace programs and managing the communication strategy so critical to the success of any organizational change

“Our organization had to deal with a large number of acquisitions over the last two years, and our HR team had to hit the ground running. We turned to Towers Watson for help in ensuring we were prepared to deliver what the organization needed. The HR readiness process gave our team a common framework and language to deal with multiple, often complex, work streams, as well as standardized tools and approaches for due diligence and integration that helped us successfully stay on top of such a large volume of activity.”— Dennis T. Leonard, Vice President of Global Total Rewards & HR Services, Arrow Electronics





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

6


M&A Readiness and Program Management Office (PMO) ServicesOur flexible stand-alone or bundled M&A HR readiness services are tailored to fit your needs across any or all of the four phases of a transaction. These include:

• Playbook Development An M&A Playbook is your HR guide for the entire M&A process. Customized to your unique circumstances, it includes a robust set of tools and templates, and covers the latest HR best practice standards for managing M&A activities, handling due diligence, and assessing and integrating the people aspects of the transaction. It enhances HR’s ability to partner with other corporate teams by documenting connection points along the way. • HR Readiness Training Our M&A HR Readiness Training is structured to prepare your HR team to play a more critical and influential role in supporting future transactions. Whether you’re an experienced serial acquirer or starting your first deal, we work with you to customize the training curriculum to meet the skill needs of your team, the specific characteristics of your transaction history and any current deal activity.

• HR PMO Services Given the vast number of work streams and activities involved in integration, an HR PMO can spell the difference between success and failure in achieving deal goals. Our HR PMO Services include: • Providing strategic guidance for key decision makers to ensure teams are focusing on the right priorities at the right times • Acting as a hub for information and communication — connecting day-to-day activities with leadership priorities • Pinpointing accountability and ensuring execution • Delivering objective reporting to key stakeholders • Managing the scope, schedule and budget, as well as the key issues and risks • Developing greater collaboration among work teams • Aligning stakeholders with a consistent set of priorities • Creating tools and templates to streamline work effort

For longer-term PMO support, we provide ongoing project management support to keep integration on track and manage change issues throughout all aspects of implementation. And in the case of international or cross-border transactions, we bring special expertise and experience in managing global PMOs.





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

7


Due Diligence Surprises are never welcome in a transaction, especially if they’re discovered too late to address the consequences. So it’s critically important to undertake the necessary detective work — as early in the process as possible — around business and culture fit, workforce program costs and liabilities, policies, and integration goals and strategy. We work with your team to:

• Identify costs, liabilities and accounting implications for the target’s retirement, health care, retiree medical and other reward programs • Understand current and legacy programs as well as local market trends • Determine gaps in programs and integration risks/issues • Identify individual contract issues • Review all executive compensation contracts and vehicles • Assess individual retention risks • Conduct a high-level culture overview based on data room information, observations and conversations

“Towers Watson ensured that our due diligence was successful — getting the right resources on the ground across different cultures and languages — and helped develop our HR M&A Playbook. They had a strong understanding of our business and corporate strategy, and brought their considerable transaction experience to bear in helping deal with our particular situation. They are an indispensable partner to Hershey in helping us achieve our growth goals efficiently and effectively.”— Debora Robare, Senior Director, Global Benefits, The Hershey Company

Case in PointTo expand its market, a U.S. electric and gas utility was considering a bid for a rival electric company. But when the company conducted its HR due diligence, it discovered that the target was saddled with an underfunded pension plan and accompanying rich retiree medical plan. Although the underfunding was severe, the company felt the acquisition was central to its business strategy, so it opted to renegotiate the price to offset the additional unanticipated cost. It was also able to address some of the cost issues via a new benefit strategy that included offering retirees lump sum annuities, freezing the pension plan to new entrants, and establishing a defined contribution retiree medical plan through a private exchange for current retirees and pre-retirees.

Towers Watson’sView

Due DiligenceTools

Towers Watson’sGlobal M&ARetention Findings

View





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

8


Integration Planning Once the deal has closed, the hardest work begins. Depending on how much change it brings for individuals across the organization, the deal’s completion tends to usher in a period of intense highs and lows in the workforce that can cut into productivity and raise anxiety. People will likely have new managers, different colleagues, new tasks and, often, different pay and benefit programs. Keeping operations running smoothly takes planning, time, resources and focus.

We help set priorities for the first 100 days, and prepare HR and other specialty teams for this pivotal period. Depending on your needs, we also supply disciplined Specific support during this phase includes:

• Building a shared vision for the integration and beyond, working with the new leadership team and defining the characteristics of an integrated culture that supports the business strategy • Providing employees with the information they need, when they need it, and advising ways to address questions and concerns whose answers aren’t yet clear • Reviewing current jobs and roles, and creating a job architecture and role definitions appropriate for the new organization and its longer-term goals • Evaluating all existing reward programs and recommending what and where to harmonize or integrate, and over what time frame — taking into account talent management, financial and risk factors • Helping balance competing priorities: from delivering day-to-day HR services, to supporting business integration needs, to integrating the HR function and technology systems

Case in PointWhen a highly respected global high-tech company decided to acquire a smaller start-up to increase market share and expand its global footprint, it seemed like a straightforward transaction. But success depended on retaining the key talent that had built the start-up into an innovation powerhouse. Other risks included an extremely short transaction timeline and big differences in corporate cultures.

First, the acquirer set up a PMO to ensure it could handle all the work streams associated with the integration of the two companies. Then, its deal team used culture diagnostics to identify key gaps in culture and employee experience. Using that information, it developed talent management and total rewards strategies to foster the creativity and collaboration that had made the start-up a success. It also launched a new, company-wide, long-term incentive program that appealed to the talent segments identified as key to long-term growth. The multifaceted strategy worked, with high levels of retention both immediately and over the longer term.

Towers Watson’sGlobal M&ARetention Findings

View Towers Watson’s

View

Integration PlanningTools





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

9


Implementation Embedding change successfully is both a rational and emotional process. It takes time, concentrated leadership and management attention, and well-defined programs and processes that give employees a clear and consistent view of the new organization and what it stands for. The day employees start identifying themselves as part of the new entity, rather than their legacy company, is the day a company knows it has begun a successful implementation. How quickly and smoothly that happens depends on a range of factors, including the size and scope of the transaction, the number of people and countries involved, the organization’s openness and flexibility, and its willingness to work the process fully through to completion.

Our proprietary tools and techniques can help you manage the entire range of implementation challenges:

• Leadership development • Change management consulting • Employee engagement surveys • Team building and conflict resolution • Training design and development • Personal and group communication development • Systems analysis and process reengineering


ImplementationTools

View

Significant SevenCritical Value Areas of a Deal

The





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

10


Explore by Deal Type • Domestic

• Cross-Border and Emerging Markets

• Spin-Offs, Divestitures and Joint Ventures





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

11


Domestic Doing a deal in your own country generally remains the most prevalent type of transaction, particularly in large, diverse countries like the U.S. or China, where the M&A options are many and varied within national borders. It’s tempting to assume that buying or merging two companies in the same country simplifies the deal process, but other than having fewer or no language or national cultural barriers, experience proves otherwise. Domestic deals still bring significant risks and challenges, in part because the many apparent similarities between the entities may lead the deal makers to miss or underestimate significant differences — especially if the organizations are from the same industry or region.

We’ve helped hundreds of organizations conduct domestic deals to expand their market share within their borders, remove a competitive threat, or enter into new product or service areas. We work with your deal team to:

• Identify pension liabilities and other accounting implications while determining gaps in programs and integration risks/issues • Build an aligned vision for the integration and beyond, including effective leadership teams and an integrated culture that supports the business strategy

• Provide employees with the right amount of information, at the right time, in an effective and engaging fashion • Get the right people, with the right skills, into the right roles for both the short and long term • Integrating your overall reward programs and policies to balance attraction, retention and engagement needs against cost and risk factors • Balance competing priorities — delivering day-to-day HR services, supporting business integration needs, and integrating the HR function and systems





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

12


Cross-Border and Emerging Markets Cross-border deals are growing in number and size — especially outside North America — although they still remain the least prevalent type, largely because they require a level of management, coordination, integration and implementation that many companies have yet to master. But they will need to develop that mastery over time to compete effectively for capital, resources, customers and workers in the global economy.

In the case of emerging-market deals, challenges and complexities can exceed those in more traditional cross-border situations. For instance, with anticorruption and anti-bribery laws under stricter enforcement, regulators are now holding U.S. corporate buyers accountable for prior U.S. Foreign Corrupt Practices Act violations, even if those violations were not known at the time of purchase. The impact is being felt by sellers in high-growth markets as they share relevant information more readily and by acquirers as they conduct more thorough due diligence.

For both cross-border and emerging-market deals, cultural differences are typically also more pronounced, since both the companies involved and their headquarters countries are likely to be at different stages of development from a business standpoint. The risk of talent loss can skyrocket.

Our presence in 38 countries and regions gives us specific knowledge and insights that can make a crucial difference in addressing regulatory and cultural factors, among other challenges.

We work with you to:

• Review and fully understand the deal context, country nuances and key areas of risk during due diligence, especially in an unfamiliar country or emerging market where conducting the thorough due diligence buyers in developed economies take for granted can be far more difficult • Prepare for post-closing due diligence to resolve any local country issues not fully addressed pre-close • Address talent and leadership retention — a key business risk in cross-border and emerging-market deals • Set a total rewards philosophy and strategy that appropriately reflects the corporate needs but takes into account unique local conditions and requirements • Help design and implement reward programs, as required • Identify an approach to HR oversight/governance, including oversight of local decision making • Address local employee communication and consultation requirements • Evaluate the right approach to supporting the HR infrastructure (payroll capabilities, policies, systems and procedures) — whether through on-the-ground resources and support, a shared service approach or a fully outsourced model


CultureTools

View


The





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

13


Spin-Offs, Divestitures and Joint Ventures The catchall term “M&A” is commonly understood to cover a far broader set of transactions than mergers and acquisitions. Lately, more than ever, these include spin-offs, divestitures and joint ventures, which business executives often view as a way to return value to shareholders amid challenging market conditions. Senior management is constantly examining business units that aren’t closely aligned with the company’s core business or have persistently low-growth rates — and choosing to spin them off or divest completely in order to achieve their bottom-line financial goals. And they’re often simultaneously setting up joint ventures with one or more partners in order to reach growth goals that they couldn’t achieve on their own.

Spin-offs and divestitures can be strategic, operational and financial game changers. They may lead to additional restructuring, require corporate support for new operational functions or otherwise introduce new organizational complexity in managing the financials. Common challenges include lack of a detailed divestiture process, failure to plan the new organization, resource allocation issues, and an overall miscalculation of the complexity and importance of people issues.

And in the case of joint ventures, problems that arise can often be traced to the early stages of negotiations: the leaders selected to represent each company, their preparation, and their advisors’ type of advice or level of experience.

In these areas, Towers Watson can help:

• Assess retention risks, and design strategies, and financial and nonfinancial approaches to retain critical talent • Create processes and tools to drive the selection process for leaders • Develop executive transition plans, and equity and/or incentive plans for the new entity • Conduct analyses of future workforce needs and gaps • Assess the culture of the parent company, and develop recommendations and a change strategy that leads to the right culture for the new entity • Benchmark current rewards against competitive norms and best practices, and recommend an appropriate reward strategy • Review benefit, workplace, work/life, time-off and perquisite programs to understand liabilities and spin-off challenges • Develop an HR strategy, structure and service delivery approach that reflects the needs of the new entity • Establish a framework for transition services • Develop an overall change management strategy and communication plan

View


The





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

14


Case in PointA multibillion-dollar global conglomerate headquartered in the U.S. with employees in 30 countries decided to spin off two businesses — an industrial air company and a defense supplier — it felt would fare better operating separately. The deal required coordinating the spin-offs across multiple countries with limited data on the non-U.S. employees, and ensuring that employees of the divested companies had appropriate employment offers and compensation and benefit packages as of Day One. Because of the complexity of the deal, HR started with organizational readiness —developing a playbook to follow throughout the process, training HR staff and establishing the PMO. It then turned its attention to building unique compensation and benefit programs that were appropriate for the smaller size of the new companies, and for the types of employees being hired or retained. The plans needed to have a common philosophy, yet conform to local regulations. Before Day One, HR had successfully established HR functions for all the businesses and had leaders in place at each organization. Communications to employees were also well under way — and a schedule had been set for regular communications over the next year, with compensation and benefit programs up and running.





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

15


Partnering With Towers Watson Towers Watson has the experience, knowledge and expertise to help your organization achieve its deal objectives, no matter the deal type, location, time frame or business sector. Our global team has worked on thousands of transactions across industry sectors and geographic borders, participating in every phase from target evaluation, through due diligence, to post-deal integration.

This breadth of experience, coupled with our extensive research-based knowledge of the employee mindset and human resource and benefit issues, gives us a strong foundation to help you make the right decisions for your workforce. Our practical experience also means we know how to shape solutions to reflect specialized industry and cultural distinctions and nuances. While we understand that each deal is as unique as the organizations entering into it, we also know how to apply a time-tested set of processes and tools to bring clarity, efficiency and order to what often feels like a chaotic process.

Equally important is how we work with you. We view ourselves as part of your team, and we anticipate being on site, working alongside you, throughout the process. We take a collaborative approach, with a focus on understanding and working toward deadlines and goals, identifying and helping address issues as they arise.

We know M&A. Shouldn’t you know us?





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

*Quote reflects personal views.

“Towers Watson has been a partner to BP for many years, working with us on multiple transactions and helping to build up our internal capabilities. We can count on them any time of the day, any day of the week, to provide focused support for us and our business partners going through deals.”

— Gary Hibbard, M&A Manager, BP*

16


Inside the Insurance Industry: Specialized ExpertiseTowers Watson’s Insurance M&A ServicesTowers Watson has the combination of deep life and property & casualty (P&C) insurance industry knowledge and M&A expertise to help companies identify, evaluate and execute corporate transactions.

As the largest global consultancy focused on the insurance industry, our experts understand the business of insurance. Our expertise spans the entire M&A process — not just one phase of the process or one specific technical skill — which helps ensure that clients’ transactions achieve their objectives. We assist insurance (and reinsurance) companies as well as investment bankers and private equity firms with merger, acquisition, sale and restructuring transactions.

Our services include but are not limited to:

Strategy and Planning • Strategy formulation and international/regional market understanding • Initial assessment and review of alternative options • Robust and documented windshield appraisals of potential targets • Managing stakeholders • Team and process organization/education

Due Diligence • Financial and risk due diligence • Investment/ALM due diligence • Distribution and strategic due diligence • Reserve adequacy and claims • Pricing and underwriting capability • Capital management and modeling • Operational efficiency • Transaction structuring • Negotiation support

Implementation • Regulatory support • Integration planning • Post-merger integration/execution

• Financial modeling • Distribution • Restructuring • Underwriting strategy

• Deal debrief • Post-deal evaluation • Purchase accounting

For more information on our insurance M&A consulting offering, please contact your Towers Watson consultant or visit us at .





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

17

http://towerswatson.com/en/Services/Services/insurance-industry-m-a-consulting


Global Reach Our 14,000 associates in 38 countries and regions work together to deliver the perspectives that give your organization a clear path forward.

• Argentina • Australia • Austria • Belgium • Bermuda • Brazil • Canada • Chile • China • Colombia • France • Germany • Hong Kong • India • Indonesia • Ireland • Italy • Japan • Malaysia

• Mexico • Netherlands • Philippines • Portugal • Russian Federation • Singapore • South Africa • South Korea • Spain • Sweden • Switzerland • Taiwan • Thailand • Turkey • United Arab Emirates • United Kingdom • United States • Uruguay • Vietnam





Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

18


Regardless of the kind of transaction you are planning, Towers Watson brings a multitude of sophisticated and proven tools to any deal, including due diligence checklists and data requests, reporting templates, transaction road maps and others, to support all aspects of people and culture integration. Here is just a snapshot of some of our tools, templates and other resources:


• HR Readiness Training: Flexible stand-alone or bundled M&A HR readiness services tailored to fit your needs across any or all of the four phases of a transaction • Playbook Development: HR guide for the entire M&A process, covering the latest HR best practice standards for managing M&A activities, handling due diligence, and assessing and integrating the people aspects of the transaction • Program Management Office (PMO) Toolkit: Our change-enabled PMO Toolkit can remove the administrative burdens to focus on issues that matter most and bring objective rigor to the process

Due Diligence

• BenTrack Side by Side: Detailed, side-by-side comparison of benefits with the capability to pull in peer-group data and determine valuation of programs • HR Due Diligence Request: List of required information, including General, Compensation, Benefits, Industrial Relations, Employee Census Data, Talent, Culture and Legal • Side-by-Side Comparison of Programs and Practices: Broad-based, side-by-side comparison of programs, policies and procedures with high-level recommendations • Culture Assessment: Tools to support the deal team in documenting and assessing initial cultural observations and findings

Tools and Resources Having the Right Tools and Resources to Help the Deal Go Smoothly





Due Diligence


Implementation


Domestic





Global Reach

M&A ToolsLearn more about our HR Readiness and Program Management

Office Services

19


Integration and ImplementationChange Management and Communication • Change Management Plan: Sample high-level change plan identifying key activities and deliverables for strategy and implementation phases • Change Management Two-Week Game Plan: Visual format for two-week snapshot of activities by stakeholder group and change lever (leadership, involvement, learning, etc.) • Communication Plan: Full-scale sample communication plan across all four phases of a transaction with its own subset of tools, including: • Announcement Employee Package • Announcement Planning Guide • Day One Employee Experience Communication Planning • Integration Planning Newsletter • Selection Criteria for M&A Communication Team • Integration Team Communication Planning Workshop • Senior Leadership Interview Guide • Communication Team Kickoff Presentation • 100 Sample Employee Questions

• Integration Plan: Sample plan for pre-close, Day One and first 100 days • Online Employee Opinion Surveys: Employee surveys that draw on advanced analytics, leading-edge technology and the world’s largest normative database of employee attitudes • Stakeholder Analysis Template: Matrix of stakeholder importance and commitment, and template for planning influence response

Culture • Culture Alignment Tool (CAT): Culture diagnostic that enables legacy organization executive leadership to test alignment quality between current attributes and new strategy, and even more important, ranking of attributes, given planned strategy shifts • Culture Cross-Match: Culture diagnostic that helps employees pinpoint their company’s attributes across a spectrum of relevant possibilities • Culture Executive Interview Guide: Guide for conducting culture interviews with executives • Culture Focus Group Guide: Guide for conducting a focus group to measure employee perspectives on current culture, as well as values and behaviors • Culture Change Road Map: Sample guide for achieving culture change objectives • Merger Monitor: Survey tool that identifies and tracks progress on key deal priorities, including drivers and levels of turnover and employee engagement, to help fine-tune post-merger integration planning and execution

Leadership • Change Leadership Toolkit: Sample toolkit for leaders, covering responsibilities and materials to use post-close; includes meeting exercises and a pre-close checklist • Leadership 360-Degree Assessment: Multi-rater input either through traditional 360-degree feedback survey or through targeted qualitative, confirmatory interviews with key stakeholders





Due Diligence


Implementation


Domestic





Global Reach


Office Services

20


Talent Management — Retention and Selection • Talent Retention Analysis: Outline for identifying key retention criteria and candidates • Re-Recruitment Tool: Tool to support leaders in determining individual retention actions related to job and career opportunities • Selection Process Overview: Sample presentation for early discussion on building the selection process • Selection Success Measures: List of potential success measures to guide development of selection approach • Selection Guiding Principles: Sample set of principles to guide development of selection approach and process • Executive Candidate Selection Slates: Templates documenting candidates reviewed and recommended for executive positions • Employment Termination Planning: Template for reaching decisions on termination processes (can be used as an HR manual after the transaction) • Selection Leader Training: Provides leaders with relevant information, timelines and talking points to guide their role in completing the selection process • Selection Weekly Scorecard: Summary statistics for completed selection activity • Project Plan: Staffing and Retention: Sample project plan for staffing and retention tasks from integration planning through post-close

Total Rewards • Total Rewards Optimization (TRO): Online modeling tool that uses a rigorous, quantitative analytic process to help organizations optimize their reward investment





Due Diligence


Implementation


Domestic





Global Reach


Office Services

21






Due Diligence


Implementation


Domestic





Global Reach

M&A Tools

To examine employers’ success in retaining essential employees during a corporate transaction, we surveyed 248 organizations in 14 countries. In our 2014 Global M&A Retention Study (our second study on talent retention in M&A transactions), we looked at the effectiveness of retention agreements — used by many employers to keep top talent on board.

We found that employers that successfully retain more than 60% of retention candidates for the full retention period (high-retention companies) use strategies and tactics different from those used by companies with retention rates of 40% or lower (low-retention companies).

Compared with low-retention employers, high-retention employers:

• Are more likely to identify retention candidates based on the employee’s ability to affect the success of the transaction: 73% of high-retention companies and only 33% of low-retention companies do this • Are more likely to consult the target company’s senior leadership in determining which employees to keep: 66% versus 27% • Are significantly more likely to consider management discretion — that is, the opinion of the target company’s leadership — in selecting employees for retention agreements: 32% versus 8%

• Use cash bonuses (rather than other types of retention bonuses) more often and are more likely to include them — alone or with other forms of compensation — in retention agreements: 80% of high-retention employers use cash bonuses for senior leaders, and 89% use them for other employees, versus 50% and 55%, respectively, for low-retention companies • Are less likely to rely on data from the target company’s HR systems to identify retention candidates — only 28% of high-retention companies use job description data, whereas 58% of low-retention companies use it, with just 36% of high-retention companies using reporting-level information, versus 67% of low-retention companies • Offer higher-value retention packages — among high-retention companies, the median value of retention packages offered to senior leaders is 60% of base salary, versus 35% for low-retention companies, with a lesser disparity in retention packages offered to nonexecutives (28% of base salary versus 16%)

To learn more about Towers Watson’s 2014 Global M&A Retention Study and for a copy of the report, go to 2014 Global M&A Retention Study Report.

Successful Tactics for Keeping Top Talent

22

http://www.towerswatson.com/en/Insights/IC-Types/Survey-Research-Results/2014/10/2014-global-ma-retention-survey-report

http://www.towerswatson.com/en/Insights/IC-Types/Survey-Research-Results/2014/10/2014-global-ma-retention-survey-report

towerswatson ma brochure

Documents