The table has been set, and now your company prepares to complete the acquisition of a rival firm that brings additional strengths and new markets. Optimism prevails for your combined company as some predict that the sky is the limit. But hold on. A significant matter you must not overlook is the talent sitting on the other side of the table.
That talent is now part of your team and sitting at your table. They held key leadership and management roles in the rival company. It was their vision that also made that company a success. If those employees had not been in those positions, the acquisition may not have occurred. In recognizing their importance, it is crucial to retain certain top-performing members. And you can do that through a retention agreement, a tool that companies use to encourage certain employees to remain working for them.
Negotiate, understand and reap the rewards
By offering a retention agreement, you are providing a financial incentive to retain crucial employees. and encouraging them to stay on. Doing so usually helps any merger and acquisition (M&A) remain on firm footing and make for a smoother transition.
Do not overlook the importance of negotiations, though. Dangling a retention agreement is not a guarantee to getting them to work for the combined company. There are details within this legal document that must be ironed out.
Among the key points of retention agreements include:
- Understand the agreement, the way the bonus works as well as whether your company can withstand any possible financial ramifications related to the agreement.
- Make sure the bonus amount is worthwhile and enough to keep the employee onboard.
- Have no hidden agendas. Be forthright about the agreement and disclose everything about the proposal.
- Your company and the employee must agree on all details. Among the issues to address include the person’s role and how it may change, the length of the agreement, how much money the employee receives if they remain with the company long enough and instructions for when the employee leaves the company before the agreement is done.
- Working with legal counsel is critical. An attorney’s insight provides a great advantage.
You sense how valuable certain employees are to your company’s future, and you understand the need to retain them. Retention agreements are key components in M&A scenarios. They play crucial roles in company transitions, while also helping you retain talent as well as certain clients.