By John Hyde
A critical component of many M&A transactions in the printing and graphics communications industry is to define the role/compensation for the former owner(s) who is becoming part of the acquiring company.
I'm not referring to the so-called "transition period." Rather, I am referncing the numerous cases in which the former owner or the partners are becoming valued employees of the acquiring company, whether in sales, operations, finance, etc.
My perspective is that the compensation needs to reflect these 6 considerations:
- Fair market rate for services regardless of ownership or employee status
- Incentive and upside opportunity
- Lifestyle (what has he or she become accustomed to, including the value of perks that will no longer be available as an employee)
- Consistency with existing practices within the sales compensation structure of the acquiring company
- Alignment between the strategic goals of the employer and the role/comp of the sales person
My NAPL colleague Mike Philie recently guided a client on his proposed compensation so that we could include this critical provision in the Term Sheet. I'd encourage anyone at this stage of the M&A process to reach out for advice and guidance to be sure that the compensation component of the deal is appropriate, and not just an afterthought.