Change-In-Control Severance And Its Impact On Key Talent Retention

As discussed in previous posts written by my colleagues Victoria Riley and Sara Josselyn, key talent retention is an important consideration for parties to a proposed M&A transaction. The uncertainty of a potential transaction may cause key employees to seek work elsewhere, which could in turn, jeopardize the deal itself. A change-in-control (CIC) severance agreement, however, is one mechanism that can be used by companies to allay concerns and prevent key talent departures.

CIC severance offers enhanced severance to key employees upon a change-in-control. The agreement must define what would constitute a "change-in-control". Although this definition is often drafted to include a merger, hostile takeover (either through share purchases or through a proxy battle) and liquidation, when drafting, it is important to carefully consider context rather than rely solely on precedent, as the definition can, in certain circumstances, be highly fact-specific. Enhanced