Personal Planning for Mergers

This wave of M&A deals: Who will be made redundant now?

Posted on Thursday, 17 September 2009. Filed under: Commentary, Mergers, Personal Planning for Mergers |

Strategic acquisitions are once again headline news with the announcement of a number of massive deals on both sides of the Atlantic (see our blog entry: ‘ Has the M&A market returned? Green shoots turn into harvest time…’).

Wait a few weeks or months, and the headlines will talk more about the people who will be (or are already) being made redundant from those deals. As naturally as dusk follows day and water flows downhill, the merger of two companies results in people being fired, plants and offices closed, product lines shut down or merged and one of the two CEOs (plus one of the two CFOs, HR heads, Senior VPs for IT, etc) taking ‘early retirement’ or departing ‘for personal reasons’ and later showing up at a lesser well-regarded competitor.

Is there anything you can do about this if you’re one of the people in a company where a merger has just been announced? Yes, there definitely is. There are actions you can take as you ask yourself the question: ‘What do I do now that my company’s being acquired?’

As reported on 2 September 2009 in The Times in a review of my new book just released in July (Surviving M&A: Make the most of your company being acquired),

‘The spectre of a merger is enough to send a chill down the spines of most employees — with good reason. Mergers always carry a risk of redundancies: on average, 10 to 15 per cent of employees across both organisations lose their jobs in a merger, sometimes as many as a third. Even those who keep their jobs are likely to be fearful of the change to the status quo.

‘In a book just published, Surviving M&A: Make the Most of Your Company Being Acquired by Scott Moeller, director of the M&A Research Centre at Cass Business School in London, explains how to improve your chances of keeping your job, based on 350 interviews with employees who have been through M&A deals. “The first question you need to ask yourself is: ‘Do you want to stay?’ ” Professor Moeller said. “A merger might be the best time to leave.”’

There are many steps you can take to stay, as discussed in that book, ranging from ‘showing off’ your (hopefully) excellent work (and going against the natural tendency to ‘stay low’ at a time like this), increasing your internal networking and even volunteering for the planning and transition teams.

If the M&A market has truly started growing again and if we really are therefore at the start of a new strong M&A wave, then many people will be faced with the need to ‘survive’ in a way that they hadn’t anticipated. Best to get started now with some planning, even if you feel your company isn’t at risk. Do you think most of the employees at Cadbury anticipated the need to plan an acquisition survival strategy in 2009? Or did Mavel’s employees expect that they’ll need superhuman skills to retain their jobs in 2010?

[Note: you can find a variation of this posting on my other blog, Surviving Mergers]

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‘How to survive the maelstrom of a company merger’ (Financial Times)

Posted on Tuesday, 30 June 2009. Filed under: Books on Intelligent M&A, Commentary, Mergers, Personal Planning for Mergers |

In the Financial Times of 30 June 2009, columnist Stefan Stern wrote an article about how to survive a merger, having in hand an advance copy of my new bookSurving M&A: Making the Most of Your Company Being Acquired

Gratifying to see Stefan Stern’s suggestion that ”…we should be grateful that Scott Moeller…has picked this moment to publish a useful new book.’ 

He goes on to agree that everyone in two merging companies needs to be thinking about their future as possibly uncertain, that talent doesn’t necessarily mean you’re a personal winner and nor does seniority (in fact, in the latter case, it works against you), and that there are ‘strange, disingenuous things’ said during the deal. 

As Stefan Stern said in the article:  ‘M&A can be fraught and filled with potential hazards’.  Exactly!  Which is why a proper defensive — or even offensive — plan is needed by each and every employee.

Anyone with any examples of the above?  Please comment on our companion weblog, Surviving Mergers!

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How did you survive when your company was acquired?

Posted on Friday, 26 October 2007. Filed under: Commentary, Mergers, Personal Planning for Mergers |

We’re doing some research on how individuals survive when their company is acquired. 

Obviously, luck plays a large role.  Serendipity intervenes.  But the fact remains that there are people who get fired and others who remain.  Is there anything that people can do to be in the survivor category?

We are looking for personal stories about what works (and what doesn’t work) when you hear the rumours or news that your company will be acquired.  Please share these with us in by commenting on this page.  It would be very nice if you are able to share with us your position in the company and even the company name, but if this is not possible, the story itself will still be of help to others who might find themselves in the same situation.

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Personnel Today’s Article on Surviving an M&A

Posted on Monday, 15 October 2007. Filed under: Commentary, Mergers, Personal Planning for Mergers |

With over 19,000 redundancies rumoured to be in the offing in ABN AMRO (see Here is the City and its article on ‘ABN / RBS Job Cuts’) and its acquirers following its acquisition by the Royal Bank of Scotland (RBS), Fortis and Santander, it is timely to think once again about the things that employees should do when faced with such a possibility.

Personnel Today included an article written by us in their most recent edition.  This can be found on-line on this link.  We are also including the text of that article below:

Trade secrets: surviving a merger – navigating the M&A minefield

This article first appeared in Personnel Today magazine.

It looks as though more mergers and acquisitions (M&As) will have taken place in 2007 than ever before. But two things never change about M&A deals: first, that a large number will fail to deliver what the architects of the deal promised and second, that many people will lose their jobs when companies combine – after all, who needs two heads of HR or the support team for two payroll systems?

It’s also an unfortunate fact that many of the survivors are not the best qualified or most experienced of the two internal candidates from the pre-merged companies – politics and luck have a role in who survives and an outsider may be brought in, or you may be demoted to a more junior role.

The secret of survival is not to leave it to chance. Our research at Cass Business School has uncovered some ‘tricks of the trade’ to being a survivor if your company is acquired. Even if both you and your counterpart remain, how do you make sure you’re the one on top?

There are no guarantees, of course, but there are several things you can do to improve your chances of keeping your office – or even getting a bigger one.

Get involved early

You must start early, and it’s best if you hear about it before the deal is announced (not always automatically the case when you’re in HR). Get on to the merger planning committee and ultimately the integration committee. This will give you the inside information before anyone else. You’ll know how the company will be organised, and since it is common to announce the top several layers of post-deal management right after the deal has been made public, anything done after that is actually too late.

Network

Once you’re on those committees, you’ll begin to network with the other decision-makers, including those from the ‘other’ company who will soon be your colleagues. This makes you more valuable to the new organisation – and less likely to be made redundant – as there won’t be many who have networked well in both companies.

One caveat: don’t be so critically important to the post-merger integration team that you cannot be taken off that team to accept one of the new key management positions.

Be visible

You should also stay around the office – particularly the headquarters – as much as possible. Become as visible as you can and avoid the common tendency to keep your head down during this period. This didn’t save people from dying in the trenches in the First World War, and it doesn’t work on the battlefield of business either.

Focus on building your network, both internally and externally. You want as much intelligence about the company as possible. Remember that sometimes those external to the company – such as headhunters, consultants and suppliers – may be better placed to know what’s actually going on because they can see the wood, not just the trees.

Let everyone know what you are doing. This is not the time to be falsely modest. Encourage your external relationships to say that they work with your company because of you. If there are others in the company who can say this as well (and you’ll say it about them, too, of course), tell them to do so.

Be flexible

You will need to be willing to move or change jobs because the headquarters may change or the new organisation will need skills of a different nature (of course, when the merger integration committee writes one of the new senior management job descriptions, you’re the one person who can fit the bill perfectly).

You may want to take key members of your team with you, so keep them happy during the merger process. This has other benefits too: with all the consultants running around the company during a merger, it’s likely that your team will be asked about you.

Your team will also be a good source of information – the rumour mill is always strongest at the lowest rungs of the organisational ladder, and there’s usually some truth to every rumour.

Explore your options

But whereas you should rely on your team, don’t rely on your boss. He or she is probably looking out for number one and not you, despite what you might be told. And where’s the guarantee that your boss will be one of the survivors?

However, despite the best planning, you may still get the short end of the stick, so be sure to polish up your CV. Call the headhunters who know you. Check the appointments section of this newspaper. Know what you would want if you are made redundant, as there is often some negotiation possible on termination packages.

And hope for a little bit of luck.

The power of employment contracts and retention payments

In the late 1990s, Deutsche Bank acquired Bankers Trust, the eighth largest bank in the US. At the time of the acquisition, Deutsche Bank set aside almost $420m over three years to retain 200 key staff, many of whom had already negotiated their retention payments with Bankers Trust when it was rumoured that it would be acquired.

What’s even more interesting is that some of those staff were ‘double dipping’. In the year prior to the Deutsche Bank acquisition, Bankers Trust had acquired Alex Brown, the oldest investment bank in the US. At that time, Bankers Trust had reserved nearly $300m over three years for incentive compensation for a group of several hundred Alex Brown employees – some of whom were likely to be the same individuals getting special payments from Deutsche Bank.

Not a bad deal if you can get it, while at the same time keeping your job.

Don’t let a merger damage morale

New research by Kenexa among 10,000 US workers reaffirms the negative impact of mergers and acquisitions on employee morale.

The findings suggest that when a company is merged or acquired, employees lose confidence in its future which prompts them to consider leaving.

Comparing the data from the 1980s and 2000s, Kenexa found that job satisfaction has improved, but people are now more likely to feel insecure and consider leaving during a merger. Feelings of insecurity are exacerbated when redundancies occur, creating a profound impact on an employee’s sense of job security.

“Merger and acquisition activity creates vulnerability to talent loss,” says Jack Wiley, executive director of Kenexa Research Institute.

“To begin the healing process and ensure employees remain engaged, management must clearly state a tangible vision and plan of action. This should include accurate and timely information about the merger and its impact on the workforce,” he adds.

Tips on being a survivor

  • Think about your personal strategy early. Pay attention to any rumours you may hear – they often contain some truth.
  • Get appointed to one of the post-merger planning committees. Encourage colleagues you trust to do the same.
  • Be visible. If you don’t work in the headquarters, find excuses to visit there.
  • Make sure that people know how valuable you are. If your clients can mention your value, even better. Now’s the time to bring in new business that has been percolating for a while.
  • Rely on your team, but not your boss.
  • Network, network, network – internally and externally.
  • Don’t forget to stay in touch with all the headhunters who have been calling you for the past several years. You may need them now, despite the best personal planning.

Our Expert

Professor Scott Moeller teaches mergers and acquisitions to MBA students at Cass Business School in London. He was an investment banker for 18 years before leaving banking for academia in 2001. His book Intelligent M&A: Navigating the Mergers and Acquisitions Minefield, published in June by John Wiley, discusses this topic in more detail, as does his blog.

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Surviving a merger: Don’t think it can’t happen to you!

Posted on Sunday, 19 August 2007. Filed under: Business Intelligence, Commentary, Mergers, Personal Planning for Mergers |

[Note:  further information on surviving a merger can be found in my other blog:  www.survivingmergers.com]

On 7 August, Management-Issues had an article based on the final chapter of our book (Intelligent M&A:  Navigating the Mergers and Acquisitions Minefield).  That chapter, entitled ‘How to Survive a Merger’ provides a number of strategies and tips on how to increase your chances of being retained in a company that has just merged, acquired, or been acquired. 

The Management-Issues article was also entitled ‘How to survive a merger’;  it concluded with a reminder about a particularly critical point, as advised by one of their thought leaders, Patricia Soldati.  She’s put together a list of the top 10 smart ways to get ahead of ‘the corporate curve ball’, as she called it.  The one noted in the article (and the first of her list of ten) was:  ‘Don’t think it can’t happen to you.’  Said another way, that’s why everyone’s at risk, even the high performers.

During a merger or acquisition integration, all too often the decisions about who to retain and who to make redundant are made on political grounds or with an appalling lack of due diligence and ‘intelligence gathering’ on the part of those responsible for the hire/fire decisions.  Even the top performers should be concerned that they may not be part of the post-merger organisation.  Or perhaps especially, as they are high profile, likely to be highly paid (at least relative to many others in the organisation), and all too often difficult to manage.

P.S.  Please do check out the blog noted above (Management-Issues);  when you get there, type ‘mergers’ into their search engine and you will find a number of very useful articles on M&A topics, especially in the career and talent development areas.

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ABN AMRO directors demonstrate well how to survive a merger

Posted on Friday, 10 August 2007. Filed under: Business Intelligence, Commentary, Mergers, Personal Planning for Mergers |

Christmas may be over four months away, but if ABN AMRO is acquired by Barclays or the RBS consortium, it looks as if the current members of the ABN AMRO board will be able to place better Christmas presents under the tree this year. 

As reported in The Times on 2 August 2007 (see the full article online here at TimesOnLine), if the Barclay’s bid goes through, the ABN AMRO supervisory board chairman, would see his pay increase from €113,000 (£76,000) a year to as much as £750,000 if he become chairman of the enlarged group.  This is the level of compensation of Marcus Agius, Barclays’ present chairman. The Scottish bank doesn’t pay it’s chairman as well, by-the-way, as Sir Tom McKillop, the chairman of RBS since April 2006, receives a basic salary of £471,000.  [Note on the foreign exchange:  to translate the pounds into dollars, just double the pound amount.]

It’s not just the Chairman of the Board who benefits.  ABN AMRO’s finance director would get £600,000 a year should he become chief administrative officer at the new company (up from about £444,000 at ABN AMRO) and would be eligible for a maximum bonus of £1.5 million next year (and a minimum of £600,000, not including other benefits such as a company car).  According to the regulatory filings sourced by The Times for their story, the six ABN AMRO supervisory board members expected to join Barclays’ board if the bank wins control of ABN AMRO would see their pay jump from between €40,000 and €70,000 a year to between £76,000 and £200,000.

Although this appears to be a conflict of interest that would lead those directors to prefer the Barclays bid, The Times also made the following point about the RBS bid: 

‘Sources … pointed out that RBS’s higher cash offer would give ABN’s board members a more immediate financial boost, based on their share options in the Dutch bank, than the salaries on the table at Barclays.’

In my earlier blog posting in June on Surviving a Merger, we questioned whether the ABN AMRO directors would be adding post-merger compensation agreements to their employment contracts.  In this case, they probably didn’t need to re-write their contracts, but rather knew that the deal — no matter which bidding bank won — would result in large increases in their personal wealth.  As we noted in that blog, ‘not a bad deal if you can get it.’ 

This is just one more example of the personal planning that goes into surviving an acquisition and the application of good intelligence:  in this case, doing the due diligence to determine how the acquirer’s board was compensated and then negotiating to keep the terms of the acquirer, not the target (despite one stated goal of the deal being to reduce expenses). 

Such compensation increases need not be limited to board members.  Intelligence can be gathered about positions at just about every level in the two merging companies before any deal is consummated.  Such information is essential to have BEFORE making a decision whether to stay or take a redundancy package.

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Surviving a Merger

Posted on Sunday, 24 June 2007. Filed under: Commentary, Mergers, Personal Planning for Mergers |

[Note:  further information on surviving a merger can be found in my other blog:  www.survivingmergers.com]

If your company is merging, acquiring, or (the worst situation, unless you’re the owner and negotiated the deal) being acquired, should you stay or leave?  This is another area where scenario planning and business intelligence is critical .  These topics can therefore apply to individual managers and employees as well as the company itself.  Most of this blog has been addressing mergers from the corporate perspective, but that doesn’t even matter if you haven’t looked out for #1.

The first question to ask oneself:  ‘Can the merger can actually serve as a jump start to a new career?’  In answering this question, stay focussed on career goals.  Do you want to remain with the new company, or is this a perfect opportunity to change?  The merger can often be used as the excuse to move.  Fortunately as well, prospective employers will assume that every merger has the consequence that good people leave (and the market often assumes that the best people are the ones who leave first as they have the most external career opportunities and are the people who don’t want to waste time to wait to see if they are retained). 

Perhaps there will be an opportunity to take an attractive redundancy or termination package.  Redundancy packages can often be higher immediately after a merger than at other times because the company has taken financial provisions for such redundancies and/or you will be part of a larger group being made redundant; most acquirers also want to avoid negative publicity during a merger.  A redundancy package would be especially attractive if you were considering leaving anyway, as many companies not only pay for you to leave, but offer at the same time outplacement counselling, re-training, relocation benefits, or other benefits.  Most employees made redundant are also considered ‘good leavers’ and thus keep many of the benefits that they had accrued during their career, such as health care and other insurances, long-term incentive options, and even deferred cash bonuses.

Of relevance today to the fight by the Royal Bank of Scotland and Barclay’s bank for ABN AMRO is the acquisition of Bankers Trust, acquired in 1999 by Deutsche Bank in a transaction that was, at the time, the largest purchase of a US bank by a foreign company.  Of course, the two bids for ABN AMRO dwarf that deal from almost a decade ago, but there are some interesting lessons.

In 1998, the senior management of Bankers Trust, the eighth largest bank in the United States, knew that it would be acquired.  The principal banking regulator in the US, the Federal Reserve Board, had told Bankers Trust management that they needed to take steps to improve their capital base and reduce risks.   They were told to look for a strong partner.

Given that management knew that they would likely be acquired, preparations were made by many in the bank to reduce their personal financial risks.  There was some history to this preparation, as disclosed by the equity research analysts at Sanford Bernstein.

In 1997, Bankers Trust had acquired Alex Brown, the oldest investment bank in the United States.  At the time of acquisition, it became known that the top twenty executives of Alex Brown had signed employment contracts and that Bankers Trust had earmarked nearly $300 million over three years for incentive compensation of a group of several hundred Alex Brown staff members. 

Given this history of retention payments and the expectation that they were to be acquired, it is not surprising that when Deutsche Bank acquired Bankers Trust just under two years later, Bloomberg reported that the Chairman of Bankers Trust signed a contract worth $55 million over five years plus $14 million over three years in deferred compensation, but it was rumored that his severance package was $100 million when he ultimately left Deutsche Bank only a month after the deal closed in June 1999.  The Bankers Trust CFO also left, reputedly with another sizeable package.

It was not only the very top staff who benefited from these retention and redundancy payments.  At the time of the acquisition, Deutsche Bank announced that it expected to take a charge of DM 2 billion ($1.2 million) to cover severance payments and to set aside DM 700 million (almost $420 million) over three years for retention payments to retain 200 key staff.

Not a bad deal if you can plan for it in advance!  One wonders how many managers in ABN AMRO have had such packages hastily added to their contracts.  We may find out soon, or we may never know.  Are there any other such examples?

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