Managing Acquisition Success in a Knowledge Intensive Industry : How key employee retention is managed in the event of a company acquisition

Abstract: Mergers and acquisitions have become increasingly popular as a method for enabling growth, and in 2021, global M&A value hit an all-time high. However, as mergers and acquisitions are complex organizational events, an estimated 70-90% of acquisitions fail to deliver value and prove to be a significant waste of time and resources. This study aims to expand the knowledge on acquisitions and their underlying success factor. Specifically, the study adopts the human perspective of employee retention and investigates two main issues; How managers of acquisitions work to retain key employees and what factors affect key employees’ willingness to remain in an acquired company. Data was collected by conducting semi-structured interviews with seven respondents from six different tech consultancy firms. The respondents all work for firms that operate in Sweden and conduct international business activities. Furthermore, all firms were involved in an acquisition deal in 2020 on the Swedish market as either being an acquiring firm or an acquired firm. The study found that to retain key employees in an acquisition, managers focus on primarily using financial and non-financial incentives, communication to instill trust in the acquisition, and creating a sense of belongingness and identity in the new company. On the other hand, for key employees, primary motivating factors for staying in an acquired company were non-financial incentives in the form of development opportunities, a strong vision and commitment communicated by acquisition managers, and identification with the company.