Retain Key Talent/S-3 Integration


In spite of all the talk about the importance of retaining key talent during M&A, surprisingly few organizations get this mission critical objective right. A while back, I heard the allegedly true story of how one Fortune 50 acquirer lost a nationally known key executive from a just-acquired company. Amid the typical post-closing chaos, the buyer just couldn’t seem to make key decisions. After numerous “air sandwich” communications about “how we’re moving forward on this or that…” the superstar executive finally got fed up and in announcing his decision via email to the entire company essentially said, “Frankly, their efforts to keep me were too little, too late. I can’t stick around forever just wondering.” Ouch! That must have hurt.

"Most acquirers buy into the premise of retention, but somehow keep missing the boat with regard to doing something meaningful about it.”

I’ve learned over the years that most acquirers buy into the premise of retention, but somehow keep missing the boat with regard to doing something meaningful about it. Typically, the senior team is locked in contractually, so examples like this one are less common. But the most skillful acquirers understand that preserving key talent throughout the organization, not just at the top, is an essential way to preserve strategic capability, and therefore an essential way to stabilize the business and maximize deal value.

First, let me make an important distinction between “retention” and what we like to call “re-recruitment.” The former is primarily financially oriented. The latter is not, at least not in terms of direct compensation. The download linked here, S-3 Integration – Retain Key Talent, summarizes some of our thinking on this important topic. Here are a few suggestions to help you reevaluate your approach:

  • Where to look? Go beyond the top level and search broadly and deeply to find the individuals with key functional or contextual knowledge essential for this deal. For example: high-potential emerging talent; critical skill shortages; those with highly strategic relationships; or leaders in urgent legacy projects.
  • Likely role in the organization? Create segments of retention or re-recruiting actions based on various categories, such as mission critical/must keep; desired keep; transition-only role; undecided, but has potential, etc. 
  • Consider the risks. Everyone can recite the replacement costs of key talent, but go beyond that to document and discuss the business operational risks, the market risks and the brand or reputation risk of losing key talent, or more broadly degraded organizational and execution capabilities.
  • Get creative and tailor your approach. As illustrated in this week’s download, one size does not fit all. Use a variety of financial retention strategies combined with a variety of lower-cost or no cost re-recruitment tactics to show your true commitment across the board. Each different solution should be targeted to a specific type of retention (or re-recruitment) target, need, project type or duration.

And finally, include talent scouting as a key part of due diligence, build retention costs into the deal economics or integration budget, act fast and implement well. And whatever you do, don’t wait for the first real keeper to walk out the door.