Retaining employees when a M&A transaction arises

Abstract

The purpose of this article is to highlight various variable remuneration schemes to employees as a consequence of the acquisition, by private equity entities, of a company in which these employees render their services; or, in the event of a merger undertaken in which the private equity entity gains control of the company being acquired.

Taking into account that sometimes the managing team of the company which acquires the business could not understand the specific business of the sector of activity of the acquired company, the «key» employees could be empowered by them to carry out the transactional decision making and leading process of the company. Thus, the employees would receive an economic incentive should they undertake specific objectives determined by the employer, as well as their commitment and permanence in the company.

In this article we have highlighted the following remuneration schemes, assuming its frequent use in these kind of transactions: compensation by means of the granting of share capital in the company and short, medium and long term bonus. The present article emphasises the reasons and the essential aspects of its granting to employees, the type of plans, as well as the effects in case of termination of the employment agreement and in the event of claims of amounts.