Employee Retention: Good People Equals Better Results

Human capital is a critical component of any merger or acquisition. High profit margins and synergistic gains cannot be realized without key talent who are able to motivate employees to achieve high levels of performance. Although there is no simple solution to retaining top performers, retention strategies should be adopted in any merger or acquisition. The most common retention award offered to executives and employees is a cash bonus, calculated as a percentage of base salary. Expressed relative to purchase price, retention budgets are quite minimal and are usually borne by the purchaser.

The Global M&A Retention Study conducted by Towers Watson (the Study) found that 88% of high-retention companies and only 67% of low-retention companies rated a transaction as successful with respect to strategic objectives. A 21% difference in perceived success is significant considering most companies allocate less than 2% of the total purchase price to retention budgets.