H E A L T H W E A L T H C A R E E R

F L I G H T R I S K I N M & A :

T H E A R T A N D S C I E N C E O F

R E T A I N I N G T A L E N T

M E R C E R ’ S 2 0 1 7 R E S E A R C H

R E P O R T

MARCH 30, 2017

Ursula Weiszflog

Principal, Mercer M&A Leader for Central Europe

and Eastern Europe

MERGERMARKET Conference

Dusseldorf

© MERCER 2017 1

2 0 1 6 M E R C E R R E S E A R C H

P E O P L E I S S U E S I N T R A N S A C T I O N S

© MERCER 2017 2

2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

S U R V E Y R E S P O N D E N T D E M O G R A P H I C S

325

75%Under € 1billion

Over € 1 billion

25%

Revenue

69%Under 5,000

Over 5,000

31%

Employees

Survey and interview responses

22%

19%

11%10%

10%

7%

6%

15%

High Tech

Manufacturing /IndustrialsHealth / Life Sciences

Financial Services

Energy, Metals &MiningProfessional Services

Consumer Goods

Other

Industry Distribution

© MERCER 2017 3

23%

49%

2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

G L O B A L R E A C H

5%

24%

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2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

R E A S O N S E M P L O Y E R S O F F E R R E T E N T I O N B O N U S E S

1 2Provide additional layer of protection above usual incentives for key people

Align interests with successful completion of transaction

T H E T O P T W O R E A S O N S

84% Gave #1 or #2 as top reason

© MERCER 2017 5

2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

R E T E N T I O N B O N U S P R E V A L E N C E

71%

Asia Outbound

76%

67%

93%

Energy, Metals & Mining42%Professional Services 94%

Transactions included a Retention Bonus

© MERCER 2017 6

Close

Long-Term

Program

Design

2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

F R A M E W O R K F O R S U C C E S S

4

Understand business

objectives

Bottom-up approach

% of deal value

1

2

3

Integrate

Standalone Business

Workforce Segmentation

Integration

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2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

I D E N T I F Y K E Y S T A K E H O L D E R S

BU

SIN

ES

S IM

PA

CT

E M P L O Y M E N T R I S K

High impact

High risk

High impact

Low risk

Low impact

Low risk

Low impact

High risk

TA R G E T

Eligibility for Retention

CEO, Direct Reports & Senior Management

Critical for Integration

Other Employees

70%

70%

35%

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2 0 1 7 M E R C E R R E S E A R C H

P A Y A T T E N T I O N T O P A Y M E N T S & T I M I N G

Long-Term Incentive Grant Payout

Retention Built in to ‘Bridge the Gap’

TO

TA

L C

AS

H P

AY

ME

NT

S I G N C L O S E

Base + Bonus

One-Time Payment at Close

Long-Term Incentive

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2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

P R O G R A M D E S I G N - P E R C E N T O F B A S E P A Y

Equity Grant

Payout

25TH PERCENTILE MEDIAN 75TH PERCENTILE

CEO 51% 100% 200%

Executives (CEO direct reports) 39% 75% 150%

Senior Management 25% 50% 100%

Other Critical Employees 15% 25% 50%

AsiaOutbound

46%CEO & Direct Reports

High Tech Industry

48%CEO & Direct Reports

50%

30%

20%

100%

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2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

P R O G R A M D E S I G N - C O N D I T I O N S F O R P A Y M E N T

66%6%

25%

3%Time Based

Performance Based

Both

OtherP e r f o r m a n c e

22% Financial

Integration20%

T i m e

80%

26%At or before Close

After Close

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2 0 1 7 M E R C E R R E S E A R C H P R E V I E W

P R O G R A M D E S I G N - N U M B E R O F P A Y M E N T S & V E H I C L E

85%

Cash Equity

31%

7%

18%

45%

30%

Four

Three

Two

One

Number of Payments

© MERCER 2017 12

2 0 1 7 R E S E A R C H P R E V I E W

R E T E N T I O N A S A P E R C E N T O F D E A L V A L U E

25TH PERCENTILE MEDIAN 75TH PERCENTILE

Less than €100M 2.0% 3.0% 4.0%

€100M – €1BN 1.8% 2.2% 3.8%

More than €1BN 0.2% 0.3% 0.7%

AsiaOutbound

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2 0 1 7 M E R C E R R E S E A R C H

F L I G H T R I S K I N M & A : A R T & S C I E N C E O F R E T E N T I O N

Program

Design

4

Understand business

objectives

Bottom-up approach

% of deal value

1

2

3

Retention Bonus Framework

© MERCER 2017 14

M E R C E R M & A R E A D Y

E X E C U T I V E D E V E L O P M E N T P R O G R A M - E U R O P E 2 0 1 7

Are you ready for the next deal?

Attend one of the executive development

workshops across Europe.

L O C A T I O N D A T E

Paris June 13 - 14

London July 19 - 20

Frankfurt September 28 - 29

Stockholm November 7 - 8

© MERCER 2017 15