Merger and Acquisition employee offer letters

By Cliff Mansfield

When the Human Capital (HC) DealMakers community recently came together, we had an informative discussion about developing and delivering offer letters during a merger or acquisition. Developing and delivering offer letters during a deal is a detailed and time-consuming process for HR teams, but there are things teams can do before a deal to prepare, for the offer letter process.

Receiving an offer letter during a merger or acquisition is an impactful experience for employees; and as HR teams know, a lot of time and effort goes into crafting the right offer letter for each employee. HR and M&A teams can better prepare for that process by considering the key questions that must be answered prior to developing and delivering an offer letter.

Delivery timing and offer letter content or structure may be informed by several factors, including:

1. Regulatory Deal Timeline: The time between sign and close and level of regulatory scrutiny inform whether enough harmonization can be done to support offer letter delivery at close.  
2. Volume and Complexity: The number of employees and complexity around their benefits offerings, compensation packages, and job structures may impact the level of work and time involved in harmonizing offerings and developing offer letters.  Each new data element included for a subset of employees creates a new set of templates. 
3. Data Requirements and Availability:  The ability to get complete and accurate data is imperative to the ability to deliver offer letters in a timely and effective manner. It is critical to work with the owners of employee data to ensure a secure transfer of complete data required.  Creating a list of required data fields and discussing each field and how it is formatted with the data owners is a good step to clarify requirements and reduce errors. 
4. Deal Type: Whether an offer letter is needed can be based on the type of deal. For example, in a stock deal where you are acquiring the entire legal entity, you may not need to deliver an offer letter at close. Or, during an acquisition where only a select number of employees are being acquired, you may put more importance on delivering offer letters in order to create clarity amongst employees.
5. Geography and Labor Law Requirements: Where the company is located today, especially as compared to where you have presence, impacts speed of offer development and delivery. For example, you may need to interact with Works Councils or update your policies to meet regulatory requirements of a municipality, state, or country before delivering an offer.
6. Degree of Change: Where employees are expected to remain in their current roles with minimal change to their reporting relationships, benefits, compensation, locations, or Legal Entities, it may make most sense to deliver a simpler Compensation Statement as opposed to a complete Offer Letter, particularly when employee confirmation signatures are not required.

Companies who wait to deliver offer letters until after close may consider providing a welcome packet prior to close. The welcome packet could include:

• General information about the company
• A compensation and benefits side by side comparison
• Learning resources
• Other useful fast facts or FAQs

Sometimes welcome packets will also include an employee agreement or handbook for employees to sign. This allows them to move onto the acquirer’s code of conduct, without delivering a formal offer letter. Delivering this key information early, but waiting to deliver an offer letter, gives acquiring companies time to thoughtfully harmonize compensation, benefits, and employment terms. 

Offer letters and welcome packets can be key components of employee retention and engagement strategies. During transactions, employees are looking for assurance and clarity, especially regarding their role, compensation, and benefits. Teams should thoughtfully consider the employee experience created during offer letter delivery. Some questions to consider include:

• Who will the offer letter be written from? Delivered by? 
• Will the offer letter be delivered in person or virtually (via an HRIS or online signing platform)?
• Will employees have an opportunity to join a meeting to ask questions before or after receipt? 
• Who will manage employee questions, and how? Is this easy for employees? 
• What process will employees follow to accept / decline their offer?

Understanding the organization you are acquiring including their location, employee agreements, job/comp structure, and benefits packages will help your team decide which timeline, contents, and method of delivery are right for you. Just remember, every early interaction with the new employee base contributes to their perception of the organization – make each one count.

Monthly our Human Capital Mergers, Acquisitions, and Restructuring (M&A/R) team connects with HR professionals focused on M&A/R work (aka Human Capital “DealMakers”) across every industry. During these sessions we discuss topics that are top of mind for them as they support their companies. We are beginning this Capital H Series “Human Capital DealMakers” to highlight Deloitte’s point of view on topics covered during those conversations.

If you, or someone on your team, is focused on HR M&A/R work and are interested in joining our monthly calls, please reach out to the Human Capital DealMakers Mailbox.

Author:

• Cliff Mansfield