After M&A dealmaking cranked at an all-time high in 2021 with a record breaking 60,000 publicly disclosed deals aggregating over $5 trillion (see our recent article), the waters of M&A cooled considerably in 2022, with only 22,000 deals with a total value of $1.7 trillion year-to-date.

What’s the risk?

On the heels of the “great resignation,” a historically low unemployment rate of 3.7% (October 2022, US Bureau of Labor Statistics), and so much change in how we work, attracting and retaining top talent is more challenging today than ever. This situation continues despite the recession.

Indeed, in an M&A transaction, losing the team required to operate the business, maintain and develop technology and serve customers is considered by many to be the number one risk for successfully executed deals.

Retaining top talent is essential to both buyers and sellers:

• Financial buyers and private equity sponsor rely on the target’s management team to carry on the daily business of the target.
• Strategic buyers rely on the team to integrate the target’s business into the broader platform and create revenue synergies.
• To founders of and investors in the target company, the continuation of the team is important in maximizing the value of deferred and earnout consideration and mitigating any potential indemnification claims.

In the recent few years, companies are (or, at least, have been) offering very attractive incentives to lure employees and fill critical vacancies,...

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