Keeping Your Cool In A Rough Merger

What about self-protection when you see a possible merger of your company on the horizon? Here, of course, a contract may help your situation, but there are other considerations. Top advisers mince no words: The executive caught up in a merger can find himself eased out with little ceremony - and maybe at an age when relocation is a long, hard process. Merger consultants, solicitors, and compensation specialists make this point: If a man is high-salaried and past 50 (and sees a merger coming) he's foolish not to take firm steps to protect his position. Says one leading consultant: "First, figure where you'll stand in the merged organization." Through competitors of the other company and industry sources, you can get an idea of the company's reputation and overall organization.

But go further than this: Through bankers and other contacts in industry, get a clear line on the man who is your counterpart. "If you're about 55 and at £45,000 and he's 40 and at £30,000 - you may have some hard thinking to do," says a McKinsey specialist. "If the reverse is true, you may be in good shape." Failure to investigate can cause a lot of agony.

No matter your age, you might want a "protective" contract for a guaranteed term of years. This idea makes sense if your company will be taken over by a larger outfit. It gives you a degree of protection - and it legally binds the merged business. But weigh the pros and cons, say the experts. Don't rely too heavily on any agreement that you manage to acquire as a safeguard. "The trouble is," says Reading consultant John Struggles, "for you, it isn't ironclad; they can ease you out if they really want to."

In some cases, the reverse happens you may be put under

pressure to sign a term-of-years contract for the protection of the merged organization. This has been especially true lately in the case of the conglomerate that picks up unrelated businesses requiring diverse talents. The trouble with this, say the pros, is that you may find it hard - as an individual - to get out from under. Thus, advisers point out that generally you should sign such a contract for a term of no more than two or three years - especially if you're going into a newly merged organization.

The tender offer can be about as tough on the managers of a company as any major move in business. Say the pros: Don't delude yourself - this type of takeover is often aimed at promptly erasing top management. If it happens to your company, your quietly putting out feelers for a new job will be clearly understood by a prospective new employer.

As to any shares of stock you may own - prior to a tender offer - the best advise is to sit tight and be guided by the recommendation of your board of directors. If you sell out quickly, you may be accused of deserting the business at a point of crisis. If you hold a stock option, though, you might consider exercising it, depending on the stock price that will be produced by the takeover.

Once a merger has jelled - and an executive has survived the shaking out - the question usually is, how much more money? Generally, the cases show that a man with expanded duties - but who operates on the same managerial level - will get an increase on the order of 10% to 20%. A step up in grade (say Director to executive Director) usually will rate a boost of 20% to 30% and up. Anything less than these ranges of increases, say the advisers, and you have some questions to resolve. But much depends on special factors - and, of course, the general state of business.

Asking for a stock option following a merger (or in the course of one) may be smart. But some advisers warn against getting oversold on this (see below). The same applies to seeking a deferred pay deal that would start paying out upon retirement. If your tax bracket is, say, 50% or better, fine - but still weigh carefully what you could do today with cash in hand. "For the short run," says a consultant with Towers, Perrin, Forster & Crosby, "a cash bonus deal may be your smartest approach."

Along with getting your compensation fixed in the merged organization, pay special attention to getting a clear, precise definition of your title, duties, and authority. Fail to do this, say the pros, and you can wind up in a muddy situation - and in trouble.


Estate Planning

When To Insist On A Job Contract

The handshake is replacing the employment contract in more UK. businesses and the newly hired executive who asks for a contract risks displaying a lack of confidence in the company - and maybe in himself. Still, compensation specialists stress that in some situations, you should hold out for a written contract.

Their advice is to demand a contract when you:

Go into a volatile company, especially in such high-risk industries as airlines, railroads, chain retailing, textiles, and entertainment.

Are hired for foreign service, where you must pick up your family and move abroad.

Join a family-owned company, where temperamental relatives can fire you.
When To Insist On A Job Contract