Retention Package Framework

RETENTION PHILOSOPHY

Why Retention Determines Deal Success

RETENTION FUNDAMENTALS

THE TRUTH ABOUT M&A RETENTION:
☐ People are usually the key asset
☐ Key talent leaving destroys deal value
☐ Retention packages are expected
☐ Under-investing is false economy
☐ Over-promising creates resentment
☐ Money isn't the only motivator

WHY KEY PEOPLE LEAVE POST-ACQUISITION:
☐ Uncertainty about future role
☐ Lost autonomy/decision authority
☐ Cultural mismatch with acquirer
☐ Compensation below new market
☐ Better opportunities elsewhere
☐ Promises not kept
☐ Left out of retention packages

RETENTION SUCCESS FACTORS:
☐ Early identification of critical talent
☐ Competitive packages (not insulting)
☐ Clear future role definition
☐ Meaningful work and autonomy
☐ Cultural fit assessment
☐ Ongoing communication
☐ Follow-through on commitments

RETENTION TIMING:
☐ Identify key people during DD
☐ Design packages before close
☐ Present packages Day 1 or before
☐ Don't wait - talent is mobile
☐ Vesting over 1-2 years typical

COMMON RETENTION MISTAKES:
☐ Waiting too long to act
☐ Under-budgeting (insulting offers)
☐ Only focusing on executives
☐ Ignoring non-financial motivators
☐ Making promises you can't keep
☐ Treating everyone the same

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COMPREHENSIVE RETENTION PLANNING

Retention Priority Assessment

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RETENTION PRIORITY FRAMEWORK
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IDENTIFICATION CRITERIA:

CRITICALITY FACTORS (How important?):
☐ Unique skills/knowledge
☐ Customer relationships
☐ Leadership/management role
☐ Technical/IP knowledge
☐ Institutional knowledge
☐ Team morale impact if leaves

FLIGHT RISK FACTORS (How likely to leave?):
☐ Marketable skills (competitive demand)
☐ Expressed concerns/dissatisfaction
☐ Less equity at stake
☐ Competing offers known
☐ Life situation (geographic flexibility)
☐ Cultural concerns with acquirer

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TIER 1 - CRITICAL (Must Retain)
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Loss of these people jeopardizes the deal.

| Name | Role | Criticality | Flight Risk | Package Budget |
|------|------|-------------|-------------|----------------|
| | | 10/10 | H/M/L | $___K |
| | | 10/10 | H/M/L | $___K |
| | | 10/10 | H/M/L | $___K |

For each Tier 1 person:
Name: _______________
Current comp (base + bonus): $_______________
Equity value at deal price: $_______________
Why critical: _______________
Flight risk factors: _______________
What they care about (besides money): _______________
Retention package budget: $_______________

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TIER 2 - IMPORTANT (Should Retain)
═══════════════════════════════════════
Loss would hurt but not be catastrophic.

| Name | Role | Criticality | Flight Risk | Package Budget |
|------|------|-------------|-------------|----------------|
| | | 8/10 | H/M/L | $___K |
| | | 8/10 | H/M/L | $___K |
| | | 8/10 | H/M/L | $___K |
| | | 8/10 | H/M/L | $___K |
| | | 8/10 | H/M/L | $___K |

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TIER 3 - VALUABLE (Nice to Retain)
═══════════════════════════════════════
Prefer to keep but not deal-critical.

| Name | Role | Criticality | Flight Risk | Package Budget |
|------|------|-------------|-------------|----------------|
| | | 6/10 | H/M/L | $___K |
| | | 6/10 | H/M/L | $___K |
| | | 6/10 | H/M/L | $___K |

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TOTAL RETENTION BUDGET
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| Tier | People | Total Budget |
|------|--------|--------------|
| Tier 1 (Critical) | ___ | $___K |
| Tier 2 (Important) | ___ | $___K |
| Tier 3 (Valuable) | ___ | $___K |
| **TOTAL** | **___** | **$___K** |

Budget as % of deal value: ___%
Market benchmark: 1-5% of deal value typical

Comprehensive Package Design

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RETENTION PACKAGE DESIGN TEMPLATE
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EMPLOYEE: _______________
Title: _______________
Tier: ☐ 1 (Critical) ☐ 2 (Important) ☐ 3 (Valuable)

CURRENT COMPENSATION:
Base salary: $_______________
Target bonus: $_______________
Total cash: $_______________
Equity value at deal: $_______________
Total comp value: $_______________

RETENTION OBJECTIVES:
☐ Retain for ___ months/years
☐ Ensure smooth transition
☐ Transfer key relationships
☐ Maintain team morale
☐ Protect intellectual property

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PACKAGE COMPONENTS
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1. CASH RETENTION BONUS:
Amount: $_______________
As multiple of base: ___x
Vesting schedule:
  At close: $_____ (___%)
  6 months: $_____ (___%)
  12 months: $_____ (___%)
  24 months: $_____ (___%)

2. EQUITY TREATMENT:
Current unvested equity: $_____ value
Acceleration: ☐ None ☐ Single trigger ☐ Double trigger
  If accelerated: $_____ becomes vested

3. NEW EQUITY GRANT:
Grant type: ☐ Options ☐ RSUs ☐ Other
Value: $_____
Vesting: ___ years with ___ year cliff

4. COMPENSATION ADJUSTMENT:
New base salary: $_____ (___% increase)
New target bonus: $_____ (___% increase)
Benchmark: ☐ At market ☐ Above market

5. NON-FINANCIAL:
☐ Title upgrade: _______________
☐ Expanded role: _______________
☐ Reporting change: _______________
☐ Team/resources: _______________
☐ Geographic flexibility: _______________

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TOTAL PACKAGE VALUE
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| Component | Value |
|-----------|-------|
| Cash retention bonus | $_____ |
| Equity acceleration | $_____ |
| New equity (vesting value) | $_____ |
| Salary increase (annualized) | $_____ |
| **TOTAL PACKAGE** | **$_____** |

Package as multiple of base: ___x
Package as multiple of total comp: ___x

MARKET COMPARISON:
☐ Competitive with alternatives
☐ Above market (intentionally)
☐ Below market (risk)

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CONDITIONS & TERMS
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RETENTION CONDITIONS:
☐ Continued employment through dates
☐ Good standing (not terminated for cause)
☐ Satisfactory performance
☐ Non-compete agreement: ___ years
☐ Non-solicit agreement: ___ years
☐ IP assignment completion
☐ Transition support as requested

CLAWBACK PROVISIONS:
If voluntary termination before ___:
☐ Forfeit unvested amounts
☐ Repay ___% of paid amounts

TERMINATION SCENARIOS:
Voluntary resignation: Forfeit unvested
Termination for cause: Forfeit unvested
Termination without cause: ☐ Accelerate ☐ Vest
Change of control (double trigger): ___

Package Components Reference

Component	Typical Range	Best For	Considerations
Cash retention	25-100%+ base	All levels	Taxed as income, immediate value
Equity acceleration	25-100%	Equity holders	May have tax implications
New equity	Varies	Long-term retention	Tied to acquirer performance
Salary increase	10-30%	Below-market employees	Ongoing cost, creates baseline
Sign-on bonus	10-50% base	Competing offers	One-time cost
Title upgrade	N/A	Career-motivated	Low cost, high impact for some
Role expansion	N/A	Growth-focused	Meaningful work matters

Retention Conversation Guide

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RETENTION CONVERSATION PLAYBOOK
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TIMING:
Ideally Day 1 or shortly after
Don't wait more than 1-2 weeks

WHO DELIVERS:
☐ Direct manager + HR typically
☐ CEO for most critical people
☐ Acquirer executive (if helpful)

CONVERSATION STRUCTURE (30-45 min):

OPENING (5 min):
"I wanted to have a personal conversation with
you about how important you are to [Company]
and our plans together with [Acquirer]."

ACKNOWLEDGE UNCERTAINTY:
"I know you probably have questions and maybe
some concerns. That's completely natural."

VALUE STATEMENT:
"I want you to know that you're one of our
most [critical/important/valued] team members.
Your [specific contributions] have been
essential to our success."

PRESENT THE PACKAGE:
"We've put together a retention package that
reflects how much we value you and want you
to stay."

[Walk through package components]

FUTURE OPPORTUNITY:
"Beyond the financial package, here's what we
see for your future role and growth..."

ASK QUESTIONS:
"What questions do you have?"
"What concerns should I know about?"
"What else would be important to you?"

CLOSE:
"I hope this demonstrates our commitment to you.
I need a decision by [date]. Please take time
to review and let's talk again."

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HANDLING PUSHBACK
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"The package isn't enough."
☐ Understand what they're comparing to
☐ Clarify total value including equity
☐ Ask what would make it work
☐ Consider non-financial additions
☐ Know your ceiling before conversation

"I have another offer."
☐ Don't panic
☐ Understand specifics (if they'll share)
☐ Consider matching/exceeding if warranted
☐ Remind of non-financial factors
☐ Know when to let go gracefully

"I'm concerned about the culture."
☐ Listen and validate
☐ Share what you know about acquirer
☐ Introduce them to acquirer team
☐ Be honest about changes
☐ Emphasize things staying the same

"I want to think about it."
☐ Completely reasonable
☐ Set specific follow-up time
☐ Offer to answer questions
☐ Don't pressure excessively
☐ Create urgency but not ultimatums

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