Questions Employees Should Ask During a Merger or Acquisition: how to use the expert advice given to acquisition executives to the advantage of employees during talent retention negotiations.

To find the right questions to ask as an employee during a merger or acquisition of your company and create a strategy to benefit from an M&A, we will take a different approach in this article. Rather than looking for answers solely from the perspective of an employee, we will look for the answers employees should be asking by reverse-engineering the thought process of executives and experts that consult them. For this, we will first look at the consulting companies' research which is regularly presented to executives during the merger or acquisition process.

First, we will look at what executives are being told by their consultants on talent retention. Here is a snippet from an M&A research paper put out by executive consulting firm Mercer:

One notable finding is that productive acquirers develop retention programs from the ground up, with people in mind. They are not prioritizing retention packages at an executive level then funneling it down to other personnel ("top-down"approach); they are prioritizing talent first and ensuring retention is planned with a strong emphasis on key employees. Additionally, this bottom-up strategy uncovered another major trend: retention projects are spreading beyond the C-suite. Buyers and sellers are being more diverse in their approach to retention and how profoundly and widely they penetrate the acquired company.

Here is another graph we have created from a proprietary research paper on insight in eligibility for retention bonuses based on employee levels:

Executives are being told that if they want frictionless employee retention and a successful outcome in an acquisition, they should focus on employees in mid/lower management and skilled talent. Not just the C-level executives. From our research, this is a repeated and pronounced part of every advice given to executives involved in an M&A. Which is a positive sign that employees are highly valued during the merger or acquisition process.

Company being acquired and employee retention process

Below, we have another snippet from consulting firm McKinsey & Co. regarding employee retention tactics proposed to executives:

Best Practices: Identify retention potentials that are critical to the acquisition 

Begin the retention phase by concentrating the efforts on senior talent. They are often the party that leads the transaction prior to closing and is ultimately liable for closing the acquisition.

To avoid them from becoming overwhelmed by questions regarding their own careers, it is vital to get them on board and match them with the acquisition's priorities and strategy. Senior management positions (54%) and staff below the executive level with vital expertise for the company (55%) are neck and neck in terms of the positions most likely to be given retention agreements early in the merger or acquisition transition.

From this, employees can derive an understanding of how to best strategize and position themselves to face the realities preemptively. For example, if you are in a senior management position or a vital high skilled position, you can approach negotiations regarding talent retention with a stronger hand and clearer demands. However, lower-level positions might want to keep a more open mind and be flexible if they plan on keeping their current jobs post-acquisition or merger.

They can also plan ahead, such as surveilling the job market in their field and speaking to outside colleagues on potentially better opportunities. This approach would have two benefits: one, you will have a Plan B in the case of a layoff, and two, you will be able to use the notion of a flight subtly in negotiation during the merger or acquisition talent retention process.

WARN Act and acquisition impact on employee rights

Second, we will take a look at what consultants are advising executives on regulations and commonly practiced internal policies during an acquisition:

Additionally, the selection process must establish "guardrails": legal parameters within which decisions must be made, such as regulatory approvals, the WARN Act' (for US businesses), and workscouncil2 stipulations (for most European businesses). These legal parameters apply to human resource practices and may vary by role, geography, and timeframe (for example, pre-close, day one, and post-close).

Usually, such guardrails are exchanged only with human resources personnel responsible for identifying and performing the hiring process, as well as with managers conducting interviews or selecting talent for the new organization. The specifications should be identified and distributed as soon as possible after the announcement of the transaction and should be checked on a regular basis by the general counsel overseeing the integration.

Note, that there is a particular law in the United States that protects employees during an acquisition, called the "The Worker Adjustment and Retraining Notification" or the WARN Act. The WARN Act addresses employee's notification about any qualified implementation process of layoffs or retraining programs. Here is a brief Q&A on the WARN Act:

Which type of employers are covered? 

WARN Act applies to companies with 100 or more full-time employees. Workers who have been employed less than 6 months in the preceding12 months or who operate an average of less than 20 hours a week are not included in the requisite 100 employees.

What type of employees are covered? 

The WARN Act applies to hourly and salaried employees, as well as managers and supervisors. Business partners are not bound by the Act and therefore do not have a right of notification under it. As mentioned in the above Q&A, the employee must have been employed for at least 6 months within the last 12 months and worked over 20 hours a week to be covered.

When is my employer required to notify me before I lose my job?

Employers are expected to provide you with at least 60 days written notice prior to closure or layoff if WARN applies. It is important that you are notified in writing of the upcoming work loss.A valid notice does not include verbal announcements from the boss, pre-printed notes distributed in your paycheck, and/or corporate news releases.

You can learn more about the WARN act by going to the Department of Labor website regarding the WARN Act.

Conclusion on what happens to employees during a merger and acquisition

Utilizing the thought process and advice given to executives responsible for employee retention during a merger or acquisition gives employees an upper hand in preemptively strategizing for all possible scenarios that might arise. It also raises the possibility of employees approaching negotiations from a position of strength.