Months of due diligence, late-night conference calls, research and working with investors and lenders has nearly come to fruition. Your company’s acquisition of another business is almost complete. You just have a few more details to address in what has been essentially a “merger of equals.”
Among those details: retaining some of the top talent from the company you acquired. It was this select group of managers who had the foresight, drive and energy to make the other company a success as well as such an attractive acquisition target. You want to keep some of them on board, whether during the transition or potentially permanently. This is where you must rely on a retention agreement.
Understand the details, make a serious offer
A retention agreement is a contract that provides financial incentives for certain employees to remain in their roles or newly defined roles with the new company. By retaining this group of employees, your company hopes to ensure a smooth transition during and after an acquisition.
There are a number of important aspects of a retention agreement. They include:
- Have a firm understanding of the agreement and the bonus that your company is offering. You do not want your company to take an unnecessary financial hit if the bonuses are excessive.
- Make sure the offer is a fair and serious one. No lowballing. The incentive should be enough to keep an employee with the company.
- Remain transparent with the offer. There is no room for deception and hidden agendas. Divulge all details of the agreement.
- Define the employee’s role as well as how and whether it will change.
- Clarify the length of the agreement and have clear details in place if the employee departs from the company before the contract is done.
- Determine the financial incentive the employee receives, based on whether they remain long enough with your company.
- Make sure to work with an experienced attorney who has a firm understanding of business law and retention agreements.
During a merger or acquisition, you must make sure not to overlook any aspect of the deal. And that includes retaining crucial executives and managers from the acquisition target.