M&A compensation issues: Can you keep everybody happy?

According to a recent survey of 1,600 CFOs, 69% indicated that their companies had completed acquisitions or merged with another company within the prior 12 months. To maximize the value of the combined company, companies are finding that they need the help of key employees. Probably one of the most significant issues involving employee compensation is whether employees will get to keep their jobs after the merger or acquisition. Compensation is an important consideration in all mergers and acquisitions. The issues relating to employee and executive compensation are similar in many respects. The combined company itself needs to be concerned with compensation issues. The structure of the merger or acquisition will affect the results reported to external financial statement users and the associated tax liability to the government. In addition, the combined company must decide how it is going to handle outstanding stock options held by executives and employees.