Acquirer's ability to retain key employees depends on legal, business -- and psychological -- factors
One critical issue for an acquiring company in any proposed merger or acquisition is how to retain executives and key employees of the target. The introduction of a third party -- an acquirer -- into an employer-employee relationship can stress its bonds to the snapping point and generate a variety of reasons for an executive to want to leave.
Some executives with change-in-control agreements who can earn more money by leaving than by staying on with the new company will prefer to take the payout if they are not offered substantial financial and other incentives to remain.
Other executives may balk at ceding their places in the corporate hierarchy in terms of salary and/or position. Opaque messages from the acquiring company regarding whether its top priority is to "maintain management continuity" or "achieve financial synergies" may baffle or antagonize personnel who would otherwise like to remain with the new company.
For their part, acquiring companies may be frustrated by executives who want retention compensation and perks not required by their current contracts, and may be disinclined to negotiate those demands, even if they wish to keep the executives. Furthermore, the uncertainty caused by a change in command often raises trust and ego issues -- often disguised as business issues -- unanticipated by acquirers but as important to employees as compensation and organizational structure.
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