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Transitioning staff during a merger or acquisition


You’ve finalised the buy or merge agreement and now have to consider how the transition process will work. Clearly, staff retention is a key issue, especially staff who have client relationships and those who have critical knowledge of the way the firm you are buying operates. For anyone moving into a new firm without prior knowledge, the process can be daunting and unsettling.

A strong transition plan that focuses on engagement of ‘acquired’ staff can have significant benefits to the merged business. What can you do to ensure that this process runs as smoothly as possible?

  1. Firm culture

A firm’s culture is all the shared values, beliefs and behaviours that determine how people do things in the firm.  A merger or acquisition is guaranteed to disturb cultural attitudes and behaviour. No matter what you think, the culture of the new firm will be different to the culture of the pre-existing firms. The new leadership team should be considering the culture that they want to see emerge from the combination of the 2 firms. If this isn’t clear up front, then they should ask for feedback from staff of both firms about the things that are important to them and use this as the basis for identifying shared values.

  1. Firm location

There are 3 choices of location during a merger or acquisition – either location of the original firms or a new location for the merged firm. It’s not recommended that merged firms retain their original locations unless there are clear and strong strategic reasons for doing so. In most cases, staff of the smaller firm will transition to the larger firm’s location, unless the physical space doesn’t allow this. For staff making the transition, there should be an open discussion about the move, with any concerns addressed directly.  In some cases, remuneration may need to be adjusted to compensate for increased travel time or cost.

  1. Employment contracts

It’s likely that there will be some explicit (and implicit) differences in the nature of employment contracts or informal agreements for firms involved in mergers or acquisitions. Benefits including flexible working hours, reimbursement of professional development costs, special allowances for leave or other bonuses or incentives should be standardised, up front, to avoid any issues or concerns. To protect both the firm and its staff, equivalent employment contracts should be a high priority as the merged firm starts business.

  1. Remuneration

Whilst remuneration should be a private matter between the employee and their employer, there’s no doubt that conversations about remuneration occur from time to time in most firms. In the short term, adjustments to equivalence of remuneration levels may not be possible if staff retention is the key goal. However, in the medium and long term, this issues can be addressed by being open and frank about the firm’s policy towards setting and reviewing remuneration levels.

  1. Systems and procedures

In order for the true value of a merged firm to be realised, it’s critical that systems and procedures are standardised as soon as possible. Specifically, workflow should always be managed within the one platform, otherwise real benefits in relation to capacity planning and turnaround time are unlikely to be realised. The staff of both firms should have an open mind in relation to ‘best practice.’ It’s usually best for representatives of both firms to be directly involved in determining what systems and processes are adopted for the merged firm.

  1. Special knowledge

Often, the best way to welcome a new employee is to acknowledge special knowledge or skills that they bring to the merged firm. Whether it’s a specific area of technical capability or a capability related to software applications, the value of their skills for the merged firm should be considered as a priority. There’s nothing more discouraging for an employee than knowing they have skills that just aren’t being utilised due to lack of interest or attention. A strong leader will always be on the lookout for special skills that can be utilised for the benefit of the firm.

  1. Client relationships

Whilst everything should be done to preserve existing client relationships in a merged firm, you shouldn’t fall into the trap of ignoring the value of transitioning client relationships from the individual to the team and the firm. Whilst clients will be expecting their existing firm relationships to be maintained, they will remain unsure until efforts are made to let them know, up front, of the value of the new business relationship. Where possible, key clients should be introduced to second client manager who can take on a support role as required.

These are just some of the key issues that you should consider when bringing staff into a new firm environment during merger or acquisition. Don’t leave it to chance. The value of a formal M&A staff induction and retention program is significant when you consider the value of lost knowledge, skills and relationships when staff leave due to dissatisfaction with the new firm environment and culture.