The Importance of Identifying and Retaining Talent

Earlier this year, Aalto published an article identifying key factors which should be considered when assessing a potential M&A transaction. One factor we highlighted for achieving a successful transaction was the retention of key talent and identification of new talent as necessary.

This holds true for most corporate transactions. Many investors search for strong management teams as part of their investment mandate and want to see that a business has a dedicated and driven employee base to ensure long-term growth. Investors and acquirors look to identify key talent both in the C-suite and among the lower levels of a business during their due diligence (DD) process and work to ensure talent remains with a company.

When considering a transaction, key talent should be identified and presented to the investor or acquiror early. Should a business be considering a fundraising or sale process, management should consider tracking employee KPIs. In addition to the operational motivations for tracking employee performance, businesses who do so will have an easier time recommending and retaining key talent amid a transaction and therefore create a more valuable business.

Additionally, in many M&A and investment processes, businesses look to cut costs by removing redundant roles within a company or companies. This can place employees on unsure footing and may cause them to seek employment options elsewhere if they are concerned about job security or what their role will look like post-transaction. Hence, being proactive about tracking, presenting and engaging with key talent early in a DD process is important for the long-term success of a transaction.

As the post-transaction strategy is discussed, key employees can be brought in to identify their motivations individually and for the business. Besides the obvious offer of improved wages and benefits, understanding what key people value about an existing company and its culture is a good way to involve and retain talent. These discussions can also inform the trajectory of the business and post-transaction strategy.