Hewitt Survey Shows Strategic Importance Of Total Rewards In Successful M&A Transactions
As corporate merger and acquisition activity continues to increase around the world, a new survey by Hewitt Associates, a global human resources consulting and outsourcing company, found that how companies leverage their compensation and benefits programs during these transactions plays a critical role in retaining key talent and ensuring the overall success of the deal.
Findings from Hewitt’s July M&A survey of 103 companies around the world showed that just 44 percent of organizations that participate in M&A activity met or exceeded their stated transaction goals. Hewitt’s survey also revealed that total rewards—which include compensation and benefits programs—is one of the main levers that organizations can use to drive deal success. In fact, of the companies in Hewitt’s survey that exceeded their transaction goals, almost all exhibited four key characteristics for how they approached their total rewards strategies:
Focusing on Liabilities in Due Diligence
According to Hewitt’s analysis, companies that exceeded their transaction goals (“Overachievers”) gave extra attention to total rewards elements in due diligence that are most likely to create liabilities. These areas included employment contracts, change-in-control and severance agreements (95 percent); executive compensation (90 percent); defined benefit retirement plans (79 percent); and executive benefits and perquisites (74 percent).“During a transaction, Overachiever companies have a laser-like focus on total rewards liabilities and leadership, while organizations that fail to meet their goals spread their attention across a variety of due diligence topics,” said Elizabeth Fealy, global leader of Hewitt’s Corporate Transactions and Transformation Consulting practice. “Overachiever companies are simply better at evaluating their total rewards pre- and post-merger, mitigating potential risks and leveraging the cost savings they uncover.” Looking at Total Rewards in Aggregate During the purchase agreement stage, Hewitt’s survey found that more than two-thirds (67 percent) of successful organizations provided compensation and benefits similar to those of the acquired company for a set time after close. This broad commitment helped ensure employees didn't experience a loss in the value of their rewards because of the acquisition—a core concern of most employees. These organizations were also more likely to make similar commitments for their employees in a divestiture situation (69 percent).
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV