Dealmaking is a thriving business once again.

Just take a look at the numbers. More than $2 trillion worth of mergers and acquisitions occurred during the first nine months of 2021 in the U.S. alone, representing a 139% year-over-year increase, according to data published by global financial analysis firm Refinitiv. The trend has been highlighted by some huge splashes, including a $43 billion agreement to merge AT&T’s WarnerMedia with Discovery.

After a period of decline in 2020, M&A is "at or near historic high levels of activity," said Jeff Black, partner and global leader of the M&A advisory services business at consulting firm Mercer. Organizations, he said, are in the middle of either stabilizing their core businesses during the pandemic, transforming those businesses or a mixture of both. For many, adding digital capabilities has been a key emphasis.

But there is another factor complicating recent M&A plays: talent. The crunch of a persistently scarce U.S. labor market, with its high numbers of job opening and historic quit rates, can put additional stress on the HR teams tasked with integrating multiple workplace cultures and processes cohesively.

Nancy Bucher ought to know. The senior vice president of HR at Chicago-based information technology consulting firm Netrix talked about her experience guiding the company through two recent acquisitions that brought about 220 new workers to Netrix, including an expanded population of non-exempt employees. That transition has been all the more fascinating given the current talent market, she said.

"I’ve been at this for 20 years," said Bucher. "I’ve never seen such nimbleness in the workforce as far as candidates and the workforce putting a stake in the ground about what matters to them, and employers responding to that."

HR professionals know that the typical scenario presented to employees by a merger or acquisition could be challenging in an environment in which some are likely to leave. Once a transaction is announced, it is a signal for headhunters to place calls to affected workforces, according to Reynaldo Ramirez, co-founder and management consultant at Thrive HR Consulting; "If you don’t do a good job communicating to employees affected by an acquisition, those employees quickly take those calls and look for opportunities."

Getting the details right

Employers might embark on a merger or acquisition with a strategy for budgeting retention dollars that places different employees in buckets, Ramirez said. For example, an employer might have a "critical leader" bucket, a bucket for technology leaders and another for sales leaders, and so on. It also may be helpful to segment a group of employees who are needed to ensure the success of the M&A transition period, but who can then leave because the acquiring company already has sufficient talent to cover those employees’ roles, he added.

The added wrinkle of flexible and remote work policies adds to HR’s laundry list of tasks during an M&A, noted Jason Walker, co-founder and CHRO at Thrive HR Consulting. "If one employer is heavily remote and the other is heavily in-office, you really need to come to an agreement and a resolution on that," he said. While initial policies may change in the near future, it is important to ensure remote policies are homogenized regardless, Walker said.

On a cultural level, employers also need to demonstrate empathy toward those who have been acquired while also working remotely, Ramirez said. That may mean checking on new employees’ personal and family situations as well as ensuring the tech aspect of the remote experience is seamless. "We’re seeing organizations that have good leaders take that to heart, especially during different transactions," he continued.

Can M&A be a pure talent play?

The prospect of acquiring new talent that can help an employer better meet future needs "is certainly a bonus feature" of M&As, Bucher said.

Walker concurred, stating that many acquisitions "are strictly a talent play." As a former HR leader at Cisco, he said he encountered situations in which a company that Cisco acquired may not have been high quality but had a skilled engineering group that bolstered Cisco’s ranks. "You’re going to see a lot of more of that … a lot more acquisitions of companies just for the talent," Walker added.

Cost-to-hire can factor heavily into that calculation, Ramirez said, given that high-end talent in fields such as software engineering can cost employers as much $200,000 to $300,000 per year in the current market. "If you can go out and find a company and your cost per employee is under $400K, that’s a great way to hire talent quickly."

In one example, Ramirez said he helped a client in Boulder, Colorado, acquire a group of 50 web developers via a transaction and retain those employees by putting extra dollars into base pay and retention bonuses. He also helped assure the new employees that their work environment would not change.

What keeps employees from leaving?

That plays into another element of M&A: "stay bonuses," to borrow Walker’s term for the payments offered to acquired workers. An employer can decide to offer payment up front or schedule regular payments over a given period of time, he said.

Today’s market could lead employers to consider more progressive compensation policies, Ramirez said, particularly given the geographic distribution of talent during the pandemic. He advised employers to "take a good, hard look" at their compensation programs to rectify disparities based on factors like geography. If an employer pays an employee 20% less than others in her position because she lives in Texas instead of California, "that’s just not going to work," Ramirez noted.

Beyond base pay, "health benefits are huge right now," Walker said, which could present an opportunity for organizations that acquire firms with less generous healthcare packages. Ramirez concurred, adding that acquiring employers should offer new workers a side-by-side comparison of their old and new benefits packages that addresses aspects such as deductibles, family and dependent coverage and out of pocket expenses.

From a cultural perspective, acquiring employers also need to be overtly clear with new workers about the stake each side has in their success, said Bucher.

"The responsibility to land your message resides with the person delivering that message, not the person receiving it," she added. "If you don’t tell them what in the world you’re doing together, they have no reason to stay."

But just because someone decides not to stay does not necessarily mean the employer’s attempts were unsuccessful. "People are always balancing their careers, and if it’s not with us, it’s not that we’ve failed them, it’s just that that’s where their career is taking them," Bucher said.

Much of what is driving the great resignation is a central question being asked by employees, she continued: "Is my company showing up for me?" HR teams may not need to make a phone call to every new employee every month, but checking in with these employees regularly and conducting "stay interviews" may ensure that they at least feel heard, Bucher said.