Asia-Pacific struggles when it comes to M&A retention

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Asian companies lag behind their counterparts in Europe and the US when it comes to retaining key staff. This according to research conducted by Willis Towers Watson on the structure, use and effectiveness of retention agreements during an acquisition or merger, with a particular focus on the financial elements of those agreements.

The study collected data, from 244 respondents across 24 different countries in Asia, the Americas and Europe.

Retention rates improved globally over the past three years, the report found,  79% of acquirers are successful in retaining at least 80% of their employees with agreements through to the end of the retention period. In the company’s previous survey (2014) on global M&A retention, 68% of acquirers met this threshold.

However, for Asian acquirers this statistic has remained flat at 70% since the previous survey, failing to mirror the global improvement since 2014. The findings are particularly significant in the Asia Pacific where management, culture and other issues present challenges that can dilute the value of such deals if not addressed carefully.

Cash bonuses, most commonly expressed as a percentage of base salary, remain the primary financial award in retention agreements for senior leaders (77%) and other key employees (80%).

“Retention bonuses are particularly important for Asian acquirers buying overseas,” said Massimo Borghello, M&A practice leader for Asia Pacific at Willis Towers Watson in a press release. “Firstly, there is a real concern that differences in national cultures, in addition to organisational culture, create greater anxiety for the acquired target employees, potentially increasing employee turnover. Secondly, we still observe a tendency by Asian acquirers to allow an acquired organisation to operate fairly independently post-merger, which increases the importance of continuity in target company management, at least through an initial period.”

Of those employees with retention agreements who do leave the company before the end of the retention period, nearly half (44%) blame the new or changing organisational culture. Other top reasons for leaving include being aggressively pursued by competitors (36%) and not liking their new role (25%).

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