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HR AND FINANCE ISSUES:

MANAGING YOUR BUSINESS

DURING GLOBAL M&A

Ragu Bhargava

Co-Founder & CEO

Global Upside

Kristina Mclaughlan

Global Director of HR M&A

Intuit

Klint C. Kendrick, Ph.D., SPHR

Director HR Mergers & Acquisitions

Oracle Corporation

August 8, 2017

5

Hire Smart

Stay Compliant

Win Globally

TODAY’S SPEAKERS

Ragu Bhargava

Co-Founder & CEO

Global Upside

Kristina Mclaughlan

Global Director of HR M&A

Intuit

Klint Kendrick, Ph.D., SPHR

Director HR M&A

Oracle Corporation

TODAY’S AGENDA

I. PROGRAM OVERVIEW

II. DEAL MECHANICS & CONTINUING OPERATIONS

III. EMPLOYEE EXPERIENCE & RETENTION

IV. LEGAL & REGULATORY COMPLEXITIES

V. AUDIENCE Q&A

UNDERSTANDING THE DEAL

Payment MeansStock vs. Asset Purchase Tax Considerations

Stock, Cash

Earn outs

How are they calculated?

Transition Services Agreements

Key Components

Length

PLANNING FOR THE NEW STRUCTURE

Ownership Structure

Shared Service Centers

Distributed Administration

Outsourced Support

Holding vs Separate Companies

Is the leadership structure clear?

Uncertainty often results in key employees leaving

Service Delivery Structure

PEOPLE

Change ManagementWork Force ReductionCore Team

Rehire to a new legal entity Are employment agreements in place?

What are the transition/termination clauses?

Severance: statutory and supplemental

Impact of unions, works councils, and CBAs

Transition to new benefits plans

Insurance/Non Insurance

Payroll continuity and compliance

Local quirks

Payroll and Benefits

“Some countries require

historical payroll records

for up to 3 years.”

“Can you transition under

existing employment

agreements or transfer letters?”

DAY AFTER THE CLOSE

Ongoing SupportInfrastructure

Will existing assets be used? Internal, External, Combination

Who can help?

Integrate or replace disparate systems?

Adding new systems

Data gathering and transfer

ERP, HRIS/HCM, Expense Reporting,

Talent Acquisition, Employee Portals, Etc.

Systems

“In M&A, the employee experience

is just as important as the product or

functional integration.

Plan for end-to-end employee

engagement, not just Day 1…”

POLLING QUESTION

Companies that invest in employee experience are

how much more profitable than companies that

don’t?

A. 0x

B. 2x

C. 4x

D. 6x

E. 10x

e.g., “Within 1 year, every newly acquired employee is actively

contributing, feeling valued, and inspired by the Buyer’s vision”

Create A Vision For Ee Engagement

To…

Acquired employees are

engaged when they say:

• “I know my role”

• “I feel valued”

• “I know how my work

aligns with this new

company’s strategy”

From…

Scared, skeptical,

minimally productive

• “Do I still have a

job?”

• “What are my new

salary & benefits?”

• “Will I like this new

company?”

Josh Bersin @ Deloitte

A 10% attrition rate is average for companies that have never gone through a merger.

But for those that have, the rate remains twice that even nine years after the event

POLLING QUESTION

What % of deal price do acquirers typically budget

for ee retention?

A. 1% or less

B. 2%

C. 3%

D. 4%

E. More than 4%

EE RETENTION IN M&A IS MORE ART THAN SCIENCE

5 EE RETENTION BEST PRACTICES

1. Identify retention candidates as early as possible.

2. Design a global retention philosophy and strategy but

allow for local and regional variations.

3. Combine pay-to-stay and pay-to-perform metrics,

when possible.

4. Secure retention agreements with senior leaders

before other employees.

5. Focus on other factors, including culture,

communication, the role of managers, role clarity,

career path, etc.

Be realistic about ee attrition after an acquisition… always have a

“Plan B”

LEGAL AND REGULATORY COMPLEXITIES

Financial Matters Anti-Corruption Privacy

Transfers & Acquired Rights Dismissals Representative Bodies

FINANCIAL MATTERS

• Be aware of different GAAP

requirements

• Account for change in control

provisions

• Some pensions and retiree

medical plans are carried as DB

liabilities

• Accrued liabilities may be

significant

• Statutory contributions and

mandatory perquisites can be

unexpected cost drivers

ANTI-CORRUPTION

• US Foreign Corrupt Practices Act

• Increasing enforcement, including M&A-related successor liabilities

• Significant civil and criminal penalties

• HR issues:– Hiring foreign government

officials and their relatives– Charitable contributions– Ethics and compliance training

for current and acquired employees

In the past 15 years, how many anti-corruption

cases have US officials brought for M&A-related

successor liability?

A. 3

B. 12

C. 29

D. 48

POLLING QUESTION

PRIVACY

• How does the target handle and transfer employee data?

• How will you handle and transfer employee data during due diligence?

• How will you handle and transfer employee data post-close?

TRANSFERS AND ACQUIRED RIGHTS

• Evaluate employee transfer

mechanisms

• Harmonize terms and

conditions

• Follow information and

consent rules

• Note limited enforceability

of restrictive covenants

• The largest potential legal consequence for violating European labor laws related to M&A transactions is:

– Reinstatement of employment in Austria, Hungary, and The Netherlands.

– Criminal charges in Belgium, France, Italy and Poland

– Two years of pay per affected employee in Ireland

– All of the above

POLLING QUESTION

DISMISSALS

• No such thing as “At Will” employment

• M&A is not a recognized reason to

downsize

• Statutory severance and notice periods

• Post-integration collective

redundancies often have additional

requirements

• Replacing regular employees with

contingent labor, outsourcing, or

offshoring can be risky

REPRESENTATIVE BODIES

• Works Councils & Trade Unions

• National Collective Agreements

• Information, consultation & consent

• Representatives are often protected from redundancy

• New representative bodies often form when M&A rumors start to spread

A FEW TAKE AWAYS…

• Have a baseline integration plan to diligence against

• Organize the diligence and integration plans by jurisdiction

• Get help from local experts

• Allow extra time in the diligence and planning stages

• Budget extra time for required consultations

TODAY’S SPEAKERS

Ragu Bhargava

Co-Founder & CEO

Global Upside

ragu@globalupside.com

Kristina Mclaughlan

Global Director of HR M&A

Intuit

Kristina_Mclaughlan@intuit.com

Klint Kendrick, Ph.D., SPHR

Director HR M&A

Oracle Corporation

Klint.Kendrick@oracle.com

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