Flight Risk in M&A

Effective strategies for employee retention, leveraging new data to significantly improve your chances of a successful transition

We are experiencing another year of a brutally competitive, full-on seller’s market around the world. As such, buyers are paying record multiples and taking on unprecedented risk in order to complete transactions. In today’s environment, where capital is abundant and cheap, the opposite is true for talent. Top performers are expensive to replace. And buyers are vulnerable to the flight risk of key talent in most transactions. The organizational change involved in most deals puts people on edge, and they opt out or disengage without an added incentive to stay focused.

In fact – one of our most significant findings is that successful acquirers are taking a people-first, bottom-up approach when designing retention programs. They’re not first budgeting for retention and distributing to employees (“top down” approach); they’re focusing on talent first, making sure retention is designed with a focus on key employees. This bottom-up approach also revealed another significant trend — retention programs are expanding outside of the C-suite. Buyers and sellers are definitely getting more nuanced about whom they offer retention to and how deeply and broadly to go into the acquired organization – a significant change from the last time we looked at retention in M&A back in 2012.

Figure 1: Eligibility for Retention Bonuses Globally


Source: Mercer analysis

Our research is conclusive. Well-designed and implemented retention programs are viewed as “insurance policies.” They keep the right people focused and engaged through integration. There is, however, no one silver bullet for buyers trying to solve deal-specific talent retention needs. While analysis of the global data uncovered regional and industry differences crucial to understand, everyone must first start in the same place in the process — with a clear understanding of the deal thesis.

Figure 2: Retention Bonus Framework

Flight Risk in M&A: The Art and Science of Retaining Talent