While a growing appetite for mergers and acquisitions appears to be afoot, there are signs some buyers are nonetheless more guarded when it comes to tapping their retention bonus budgets for payouts designed to keep target companies’ top executives and employees in their seats.

“Where it used to be more common practice to award the entire pool, we’re hearing more often that they’re reserving some back...it’s called dry powder,” Josephine Gartrell, a senior director in Executive Compensation and Board Advisory at Willis Towers Watson, said in an interview this week. “They’re holding it back to give smaller retention awards or shorter retention grants to the first subset of individuals and then keeping some back so they can then determine who is still a flight risk, who has shown themselves to be more critical.” 

That increased discernment comes as the volume of completed global mergers and acquisitions rose 11% in the first quarter, lending some support for the prospect of a brighter 2024 for dealmakers, many of whom moved to the sidelines in the latest cycle, CFO Dive previously reported. 

It’s not fully clear how much these slower payouts are tied to the lackluster M&A market in recent years. Some of that caution may also be a function of the smaller size of deals getting done, Gartrell said. But what is clear is that CEOs, CFOs and employees should not bank on getting a robust stay bonus just because the acquirer has done so in the past.  

“To a serial acquirer it’s not like it used to be where you had a playbook and you used the same retention strategy for every company,” Gartrell told CFO Dive. “It’s not really a one-size fits all approach that works anymore.”   

Of course, not every staffer at an acquired firm is handed a stay bonus, according to WTW’s 2024 M&A Retention Study released in March. Just 72% of acquiring companies have fixed budgets for “retention pools,” the value of which is typically less than 2% of the a deal’s purchase price, according to respondents from 159 companies across multiple industries surveyed by WTW late last year. 

Buf if they do, CFOs, CEOs and other C-suite officers are two times as likely to be offered retention agreements than non executives, according to the study. The mean annualized retention value as a percent of salary is also higher for those farther up the ladder, coming in at 50% for CEOs, 43% for finance chiefs and others in the C-suite, 30% for other senior leadership and 25% for other salaried employees. 

Sometimes retention bonuses come into play when companies are facing tough times: In March, the arts and craft retailer Joann approved a one-time $400,000 cash retention bonus for its CFO Scott Sekella as it faced speculation of a looming bankruptcy. Just days later, the company filed for Chapter 11 bankruptcy, CFO Dive previously reported.  

As for any unusual takeaways from the WTW retention study, Gartrell said she wasn’t surprised by the size of the retention bonuses that it indicated. But she said it was notable that there appeared to be a shift toward the use of more equity in the bonus packages.

And looking ahead, she advised executives at both acquirers and acquired companies to be aware that the specific facts of a given deal will dictate the who, how and when of the payouts. “For either side, it’s important that the acquirer and the target consider the nuances of the deal and what talent is critical, regardless of the job level,” Gartrell said.