Mergers and Acquisitions: How Executive Compensation May Affect Deal

Abstract

Mergers and acquisitions almost always threaten a corporation's existing compensation plan. When such transactions occur, the acquiring company must consider and evaluate the acquired company's current executive compensation program. In addition, it must measure the value of the acquired company's compensation components, implement its own policies, and restructure a new executive compensation program. Some of the issues executives will want to consider include: 1) Will it be feasible to use pooling-of-interests accounting? 2) What will be the impact of change-in-control provisions? and 3) What compensation issues will need to be addressed once the deal is completed? When considering these issues, it is best for the companies involved to include representatives from both parties and third-party moderators in order to structure a more applicable compensation plan that benefits both their employees and their shareholders.