I have a friend in corporate who is currently going through M&A (as a target). He has been classified as a necessary resource and has been told that he is getting a retention bonus if he stays on. He reached out and asked me for advice and I realized I don't know anything about it.
I think that there are several potential outcomes:
1. The bonus is paid if he stays for a year.
2. The "bonus" is paid if he gets fired within a year.
3. The bonus is paid after a year, but he might be offered a job at the acquirer's headquarters, which if he doesn't accept, he will get fired without the bonus
I've never actually seen this before. Modeling synergies is one thing, but I've never been on the operational side of a transaction. Does this sound right?
Also, do you think he has room to negotiate any of the terms? Or the value of the bonus itself? My buddy is currently very critical to the transaction, and is approximately equivalent to Associate / VP level.
What do you think?
Silver banana's for good advice.
Reteniton bonuses are fairly common and they work to your friend's advantage. I had one when I left Citadel -- they were shutting down our desk, but they needed our help to wind it down orderly. Since we all knew we were going to be fired in six months, why would we stick around instead of looking for a new job right away? Hence, the retention bonus was an agreement from the company that we wouldn't get screwed over by staying. It was a fair deal, and at least in my case, the company honored their agreement and gave me everything they promised. Same thing with your friend -- the merger creates enough uncertainty for him to look for other jobs cause he might get fired. So they're offering him some protection against that. Sounds like a legitimate offer made in good faith.
You can always try to negotiate, of course. However, your leverage may not be that high: your boss who is presenting the offer now has a new boss at the company he's merging with, and he's worried about keeping his own job rather than fighting for you; and the new company doesn't know you yet so they don't know whether you're worth the trouble of negotiating; and the new company surely wants to cut costs and let go of some people, so they probably won't be too upset if one or two people refuse the offer as long as they get most of the rest; and besides, if they didn't offer you any bonus at all, there's a decent chance you might stay anyway to see how the merger works out.
If your friend says, "I'll stay if you raise the bonus to X", is he prepared to quit if they don't do that?
Thanks. +1.
I don't think my friend is thinking of negotiating the number higher necessarily. Just wants to know the mechanics so they can make an informed decision. I think he's wondering about the old adage that it's easier to find a job when you had one. If you stuck around for the bonus at the end, but were cut afterwards. Basically, would it have been worth sticking around for the bonus, or was unemployment afterwards such that it might have been better to forego and look for a job immediately. (ie. get bonus equivalent to six months pay, but took over six months to find a new role due to being unemployed while looking?)
I had a similar situation last year with my company, however, regarding #3 the condition was that if I was offered a job with the surviving entity and accepted the position I would not receive the retention bonus. If I was offered a position, declined their offer, but stayed for the term of retention I would still receive the bonus.
In terms of looking for a new job - it is definitely to your advantage being fully employed while job searching as this comes up in every interview - the longer you are unemployed the more this becomes signal to HR. If you are unemployed they will typically low ball you since they have nothing to lose really so you always have to negotiate hard. Timing of the job search is a big factor in companies hiring cycles (summer vs fall for example). You can play out the retention bonus and try to get jobs after that but I would recommend being proactive looking for a new position right away and leave the bonus on the table should you find the right fit elsewhere. If you can time it perfectly with starting your new position after your retention then that is awesome - but betting on it could cost you as well. Just my experience from the past year, and while things worked out for me I definitely would have been more proactive from the get-go. I'm sure others may have different experiences.
I had a client that offered those before entering into chp 11. The way theirs worked was the employee would receive half of the bonus now and the other half on the exit from chp 11, conversion to chp 7, or one year from the date of the first payment. If they were fired for cause or left on their own before the second half was paid, they were required to pay back the first part.
"Modeling synergies is one thing, but I've never been on the operational side of a transaction." – Banking and Consulting in a nutshell...scoffing at management teams during deals for being "stupid and unsophisticated", yet absolutely clueless on how a business actually works.
About looking for a job while you still have one - can your friend negotiate an agreement that would allow him a long enough notice period to find a job (3-6 months, I'd assume, at that level), or one that would give him a desk and a phone number while he's still looking for a job? The former is very commonplace even in normal situations, and I've certainly heard of the latter being granted on occasion. Either one would give him the smoothest transition into another position.
Largely depends. From my personal experience you are paid x amount if you stay for a certain time period post close. It may be in a few payments. For example, 50% within 180 days post close and another 50% within 360 days. I have seen where you still get x percentage even if the merger doesn't close. Usually you cannot move to a new position i.e. If you are in treasury you can't move to Corp strat. Makes sense since they value you in your current role.
Negotiating terms I would say absolutely not. They need to offer fair treatment to all employees and there may be potential legal problems. He may be able to negotiate more, but that is risky. Usually the bonuses are x percentage of income. So there may be some room, however, if he stays and will ultimately be fired I would say there is little room for negotiation as they likely just need a body to do the work compared to someone they value and want to retain. It is a personal question of short term financial gain vs long term career prospects. I would expect they would let him know in the interim if his position is being eliminated. I would say sit tight for now and try and gain more info.
I would start talking to other managers and see if they have a spot post close. This also has its risk. Without knowing the culture and politics of the company hard to say. Just my .02.
Thank you to everyone for the good advice. Buddy got the letter. Terms were pretty much in-line with what was mentioned above.
Really appreciate people taking the time to go through their experiences. Was nice to have some benchmarks for what was reasonable, given the circumstances. Buddy didn't negotiate, but also felt comfortable signing, knowing that what he was getting was pretty standard.
Booz&Co / Strategy& - retention bonuses? (Originally Posted: 04/10/2014)
How are retention bonuses, both amount and structure? I believe PRTM's were 2X prior year bonus, paid out in equal 1/3 payments over the year following close. Are the Booz&Co consultants getting something similar?
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