A typical scenario I have observed and you may have directly experienced is the following:
The company takes on a fairly large and important acquisition, so they pull on their best and brightest functional managers to drive this acquisition. These folks already have full-time jobs, but because they have demonstrated a commitment to achieving success on prior integration efforts they have been chartered to “do it again”. They know they are looking at 14-hour work days and 6-day work weeks, that the project will be under-resourced, and that their efforts will often be under-appreciated, but being dedicated professionals with a commitment to success they jump into the task at hand.
However, adding the proverbial insult to injury, they too often see the following:
- As division head of the business acquiring this entity, he/she sees that the CEO of this acquired entity will be walking away with $12.5 million dollars and an attractive 1-year consulting agreement. And this was a person who was brought in only 2-3 years ago to prepare the company for sale. This division head, with 15-plus years of dedicated service to his company will never see anything close to this pay-off.
- The key directors and managers of the acquired company will have all their stock options vested on date of close, and with the premium paid for by their company they all look to receive a six-figure pay day for their stock.
- A lot of management time and effort is being directed toward addressing the issues and concerns of the employees of the acquired company. Those not receiving jobs going forward are getting attractive severance packages and other perks, outplacement packages, and other benefits that were never given to prior employees in some layoffs and downsizing that may have occurred over the last year or so.
Bottom line, the folks slogging in the mud to make this deal successful are wondering if they ended up on the wrong side: better to be the one bought than the one buying? They are feeling, “What am I, chopped chicken liver”? Yes, they have a job but look at all the work they have to do, the pressure they are under, and then if benefits are not delivered, will they become the fall guy?
Sound too familiar? Well, what I see with the best-of-breed serial acquirers, and a best practice the M&A Leadership Council supports, is recognizing and rewarding those hard workers, dedicated employees that are driving this integration effort. A significant part of this is setting up financial reward for these people: performance bonuses and in some cases stock options.
Given the amount of money spent in all the other acquisition and integration areas, most of which are sunk costs of doing the deal, this is a relatively small investment to make in the folks who are really dedicated to delivering the benefits of the deal. And, while the monies paid to reward these performers is rounding error compared to all the other transaction and integration costs, we would encourage you to make these significant amounts to the individuals involved (25%, 50%, even 100% bonuses, depending upon contribution and value delivered).
Additionally, as our best practices companies understand, it is also important to provide other rewards and recognitions beyond these bonuses: personal recognitions and “atta-boy/atta-gal’s” by the CEO and the management committee; gift certificates and thank-you letters to the integration team spouses; travel rewards; special mementos commemorating the integration project (I have seen engraved desk clocks, wrist watches, wall certificates and other office/desk keepsakes given in recognition).
These integration team members understand the realities of an acquisition dollar (that the key management of the acquired company will walk away with some significant dollars). The important thing is that their management recognize and reward them for the hard work and sacrifice they will make over the next three, six, nine months to make this M&A integration a success. Smart companies make sure they treat these people fairly and publicly express their appreciation for their contributions…. At the end-of-the-day that is all these folks are looking for.
Submitted by Jack Prouty, President of the M&A Leadership Council
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