CorpFin VP Working on Merge - Job Impact?

PE folks-

I'm currently a finance vp (no equity) at a privately held middle market company, roughly $200m in revenue. We're in discussions to 'merge', as they like to call it despite it being more of us being acquired, with a larger private company that does roughly 3-4x the revenue of our business. Only a select few individuals in the company know this is in motion, and my role thus far has been to help with financial data requests, 3-year models, and some light analysis. My concern is that I'm going to get to the end of this and ultimately be shown the door if the management of the larger company stays in place and retains the key members of their leadership team. It's an strange position since I'm aware of the discussions and also an employee of the smaller company. My boss talks as if I'll have a place, in general terms, in the newco but obviously is telling me what I want to hear to a certain extent since his role is also uncertain. 

My question is, since many of you are involved in these types of transactions, do any of you have experience for what people in my position do? Do people ever negotiate a predetermined bonus if/when the transaction goes through? Or, some other kind of retention bonus to dissuade me from looking at other external job opportunities? Or, an agreed upon role/small equity with newco after the deal goes through? I enjoy my role, the team, and the company, but also don't want to be naive to think that there isn't a scenario where I work to help close the deal and then am left with a small severance and am forced to look for a job while unemployed.

If you can share any experience, that would be very helpful. Thank you!

 
Most Helpful

I can't help you much here, but you're right to be considering this as you may or may not have a role at the acquirer, and you won't know that until it's too late. I was once offered a retention bonus should my old company have been acquired, but didn't proactively seek it - it was offered to a handful of people in the know very early on. 

If you are integral or at least somewhat important to getting a deal done in a timely manner, I would strongly consider asking for some sort of retention bonus to be paid on or right after a potential closing. The worst they can say is no. I would probably at least ask for an amount equal to half of your base salary. I'm not sure what position your boss has in the company, but you may be able to feel it out with him first if it isn't the CEO/CFO. Like "hey, do you know if management has considered offering any retention bonuses?" and let it proceed organically from there. Theoretically, he should be just as concerned about his place, if not more so since he's probably more experienced and it may take longer for him to find another gig than you.

 

Thanks for the input. I don't think my boss (executive level) is as concerned since I know he has phantom stock that is tied to any sort of liquidity event. So, even if he gets let go after the transaction, he's set with a large payout. If anything, he's pushing for this, so we're not necessarily aligned at this point as far as incentives go. 

 

Have seen this from outside - you should definitely have a frank conversation if you feel your role will be made redundant.  I think a transaction bonus is not out of the question and if you want to stay, you should push for a formal employment agreement with terms that make you feel comfortable.  

Separately, I would go ahead and reach out to recruiters.  No reason to not have your bases covered.

 

Has your company bought or sold anything in the past couple years were management teams were given stay or retention bonuses? If so, I'd ask for something similar in terms of % of base. You can go in expecting to get negotiated downwards at the very least, but might as well start higher than you think they'd give. I have a very limited data set on sell sides (1 or 2) but have seen management incentivized ~1x base. I'd recommend asking for at least 50% of your base salary, but you might as well ask for closer to 1x, especially if the vast majority of your comp is in the form of base salary. 

 

Appreciate the data point. The company doesn't have any prior experience with a transaction like this, but I do like the idea of asking for 1x all-in comp as a hedge against unemployment. 

 

you're in a complicated position. The deal (especially DD phase) is typically your opportunity to show what you are worth. I have seen people from the target (smaller) company being kept and people from the acquirer being let go, so it's definitely possible. 

I think you should definitely try to talk to your boss about a retention or transaction bonus. Often people who have no direct incentive in the deal (sweet equity, stock options, phantom equity etc.) get some kind of retention or transaction bonus.

 

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