How firms can retain staff amid M&A

Culture clashes and differing management styles are among the reasons why, recruiters tell Money Management, they see employees changing jobs post-M&A activity. 

Earlier this month, we explored the psychological impact of M&A upon employees who feel stress and uncertainty for their jobs during the process: staff can experience high stress levels, their salaries may come under scrutiny amid cost-cutting, workloads may increase, and staff have to adjust to a new culture.

As a result, the Harvard Business Review found 33 per cent of employees said they seek a new role within the first year of M&A.

Money Management spoke with three recruiters about their approaches to candidates who are undergoing an M&A process and exploring new opportunities. 

Pre-M&A

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One of the most critical points of an acquisition is communicating with staff and teams to ensure consistency of messaging and reassure them of their job security or potential changes. 

Darragh Cleary, NSW state manager at Kaizen Recruitment, said: “It is critical for leaders to articulate a clear vision while appreciating the existing culture to successfully bring people into the fold of a new strategy. If employees can see themselves in the plan, and the messaging has been well communicated regarding their future contributions, those staff members are more likely to stay on if they feel valued and if their values align with the organisation.”

He said only 3 per cent of respondents to a poll by the firm said they would look to leave their job straight away. These individuals would likely be those who were concerned about their position being impacted by subsequent restructuring.

This can particularly be the case for those in C-suite or managerial positions where their roles may be duplicated across the two businesses. One of the biggest examples of this lately is the merger between superannuation funds Sunsuper and Qsuper to form Australian Retirement Trust in February 2022.

“For example, there may be two CROs, so individuals who don’t think they’ll secure the role will look to secure other options in the market as contingency plans,” he added.

In order to retain these staff, Mischa Bennett, managing director at Capital Executive Search, said the use of financial incentives is common.

He said: “Key personnel are often given ‘retention payments’ that incentivise them to stay from the time the business has either announced they will sell, or have completed a sale process (or buy purchase in the instance of the purchaser) so the business doesn’t lose momentum through the sale process and after completion.”

Post-M&A 

Once an acquisition has gone through, Cleary said 89 per cent of respondents indicated they would remain at the combined firm in the short term and observe how the changes affected them before making a decision. 

However, just 8 per cent had an active intention to remain there for the long term, saying they saw M&A as an opportunity to build their careers within a larger or international organisation. 

Fabian Ruggieri, director at RIVA Recruitment, said there were three common reasons that employees sought to depart after an acquisition. 

“It’s quite common that people seek new opportunities following a merger. The main reasons for this are clash of cultures, differing management styles and employment uncertainty.”

Bennett said the first six to 12 months were critical following a merger once the acquiring firm had completed its transition and set about considering future developments as well as determining how teams integrate and work with the existing organisation.

“We get approached all the time by candidates in these situations. You can often see big movements within companies through this time, so it’s worth seeing if a reorganisation of a team results in a good career move. New team structures are usually decided with the help of consultants at around the six to 12 month mark.”

Whatever the future intentions of staff, it is crucial for employers to provide information to their employees on where they will fit in the new organisation or provide development plans, to ensure staff wellbeing is being supported and provide initiatives such as mentoring or skills training.