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Managing Mergers: Strategies for Retaining People-Based Economic Value

In the complex landscape of mergers and acquisitions, retaining human capital is crucial for sustaining economic value. Patrick Donohue, National Lead Partner for Human Capital M&A Services at Deloitte, outlines essential priorities and strategies for effective merger management. Key focuses include minimizing disruption, ensuring optimal cost, and finding strategic fit. He discusses infrastructure options such as absorption, new design, and cloning strategies while emphasizing that fair compensation alone does not guarantee employee trust. Retention of key personnel is pivotal for leveraging synergies and achieving the desired business outcomes.

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Managing Mergers: Strategies for Retaining People-Based Economic Value

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  1. Managing the Merger &Retaining People-Based Economic Value Patrick Donohue National Lead Partner Human Capital M&A Services Deloitte & Touche

  2. Priorities and Strategies in Managing a Merger Speed and Simplicity Minimize Disruption Optimal Cost Strategic Fit

  3. 1. Minimize Disruption 2. Speed and Simplicity 3. Optimal Cost 4. Strategic Fit Priorities and Strategies in Managing a Merger Day One On Going Operations 1. Optimal Cost 2. Strategic Fit 3. Speed and Simplicity 4. Minimize Disruption

  4. Infrastructure Strategy Alternatives • Absorb Bringing the target into the new parent • Advantages: The “Obvious Choice”, simple and direct, demands little executive time • Disadvantages: “Conquering Army” approach, reduced value on key assets and people in the acquired company, great strain on parent company resources • Design A New Infrastructure • Advantages: Optimal strategic fit and cost structure. • Disadvantages: May be more disruptive during transition and add time and complexity to the launch of the new organization. • “Clone & Go” • Duplicating the infrastructure of the target • Advantages: It works, its quick, and can minimize disruption. Can be an effective temporary strategy. • Disadvantages: The adopted model likely to be a poor fit for a smaller, younger organization.

  5. Especially During a MergerPay Alone Will Not Keep People Trust Fair Market Compensation Total The Job Rewards Strategy Wealth Accumulation Career & Growth Opportunity

  6. Retention of People-Based Economic Value Starts with the Business Case of the Merger • Capitalize on Economies of Scale • Reduce overhead • Eliminate redundancies • Access markets • Leverage Core Business • Forward integration • Backward integration • Acquire substitute product • Grab market share • Transfer Skills/Technologies • Acquire distribution channel • Make a bet on new technology • Invest in new product line

  7. Start With the Business Case (continued) Degree of Intellectual Extent of Capital Transfer Retention Effort Moderate Focused High Broad Very High Extensive • Capitalize on Economies of Scale • Leverage Core Business • Transfer Skills/Technologies

  8. Assets Sample Retention Targets • Group Head • Key Technical Contributor • Human Resource Director • Human Capital • Leadership • Expertise • Culture • Structural Capital • Process Efficiency • Database/Knowledge Base • Network/Alliances • Process Owner/Case Manager • CIO/IT Professional • VP, Business Development • Account Manager • Marketing Manager • Sales Rep • Key Accounts • Brand Equity • Customer Capital Where is the Intellectual Capital?

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