November 27, 2022

Volume XII, Number 331

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Question of the Week: What are your recommendations for handling human capital issues in an M&A transaction?

What are your recommendations for handling human capital issues in an M&A transaction?

“Recognize that Human Capital is a deal within the deal and plan accordingly. Deal teams sometimes overlook that they need to project out and calendar the key inflection points for successfully closing on the Human Capital part of the deal—just like they would for the M&A work-stream. Understanding that Human Capital requires its own closing just like the other critical work-streams is the key process insight to ensure that the right tone is set from the beginning."

– Ben Orlanski, Partner, Mergers & Acquisitions

“Start with a 30,000 foot view and work your way down. First, focus on the structure and business strategy surrounding the transaction. Is it a merger of equals, carve-out deal, asset deal, joint venture, etc.? Which employees and job functions are critical to the business strategy? This will help identify key HR-related goals. Once you understand the structure, you can narrow the focus on details regarding the compensation arrangements, what will be triggered as a result of the transaction, and how to best incentivize and retain the team going forward.”

– Andrea Rattner, Partner, Employee Benefits & Executive Compensation  

“One of the most important aspects in M&A is effective communication with employees. It’s critical to maintain brand loyalty and high morale during a transaction and keeping those most affected informed of any impact on them. The go-forward strategy is the best way to do that. Answer the questions you can, follow up when you say you will, and be transparent. This will help you retain the talent that is most valuable to the organization post-transaction.”

– David Teigman, Partner, Employee Benefits & Executive Compensation

Where there are employee owners, decide how to account for their tax goals and expectations for the transaction. Employees are a very important constituency in a deal, no matter how much of a company they own. An M&A transaction may be both an entirely new and unfamiliar experience and yet of significant, even potentially life-changing, personal importance to an employee.  Addressing taxes with personnel requires tact and, at times, adaptability. Knowing ahead of time that a certain tax outcome may be counterintuitive is helpful as well. 

– Malcolm Hochenberg, Partner, Tax

© 2022 Proskauer Rose LLP. National Law Review, Volume XII, Number 243
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About this Author

Ben D. Orlanski Los Angeles California Partner Mergers Acquisition Capital Market Law Proskauer Rose LLP
Partner

Ben Orlanski is a partner in the Corporate Department and is a member of the Mergers & Acquisitions Group and the Capital Markets Group. Ben focuses on major corporate transactions and strategically solving critical business challenges. He has significant experience in securities and public company representation; mergers and acquisitions; capital markets transactions; special committee, board of directors and general corporate representation; and corporate governance. His experience covers a wide range of industry sectors, including software-as-a-service, REITs,...

310-284-5653
Andrea S Rattner, Tax Attorney, Proskauer Law Firm
Partner

Andrea S. Rattner is a member of the firm’s Executive Committee and the immediate past Chair of the Tax Department. 

Andrea practices in the field of employee benefits and executive compensation law. She counsels clients with respect to the tax, securities, corporate governance, stock exchange, ERISA and other implications affecting executive compensation arrangements. Andrea regularly provides advice regarding equity arrangements (such as stock options, restricted stock, RSUs and phantom stock), employment agreements, change-in-control...

212-969-3812
Partner

David Teigman is a partner in the Tax Department and a member of the Employee Benefits & Executive Compensation Group. David focuses his practice on executive compensation and benefit matters, principally in connection with mergers and acquisitions, securities offerings and senior executive employment relationships.

David regularly counsels public and private companies on compensatory and benefit arrangements, such as equity-based incentives, cash-based incentives and employment, change-in-control, retention, separation and consulting...

212-969-3440
Malcolm S. Hochenberg Tax lawyer Proskauer
Partner

Malcolm S. Hochenberg is a partner in the Tax Department. Malcolm has a broad practice, including inbound and outbound mergers and acquisitions, capital markets transactions, financial products, cross-border investments (with some emphasis on joint ventures involving intellectual property and other businesses) and tax controversies. Malcolm represents public companies, closely-held companies, asset managers and high-net-worth individuals.

In 2013, Malcolm was the chairperson of “Under 10,” which is the New York State Bar Association Tax Section’s group for lawyers...

+1.212.969.3177
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