Mergers and acquisitions in the energy sector are common. These range from a strategic merger such as BP and JERA’s offshore wind businesses, as well as targeted acquisitions to build capability as in the cases of Seajacks to Marubeni or Electroroute to Mitsubishi. Or, as increasingly seen in the market, it might be corporate acquisitions targeting the clean energy portfolio as illustrated by NTT’s majority acquisition of Green Power Investment.
In fact, many companies in the energy space begin with the end in mind. Development platforms sponsored by private equity funds typically have a limited investment time horizon in which they will maximise portfolio value with a view to exit at a certain time.
As an employee, how can you act and react to such changes? What opportunities exist in a change of ownership situation, and what threats should you be aware of and prepared to navigate?
Which side are you on?
A jumping off point for this inquiry would be whether you are with the acquiring or the acquired (or the majority or minority shareholder). Advantages on the acquiring / majority side are:
- Tendency for upper management positions to be filled by majority stakeholders providing fast-track, career step-up opportunities;
- Strategic direction, company culture, rules and benefits are usually shaped by the acquiring company;
- The inevitable impacts of change within the business will be lesser;
- Opportunity to become exposed to new technologies, projects, and business without changing your company.
Does this mean that if you are on the side of being acquired or taking a minority stake that you should be looking for the exit doors as soon as you catch wind of the news? Discretion must be exercised, but we should bear in mind potential benefits that can roll to the minority side as well.
- Management independence. An acquisition does not necessarily mean total assimilation into the proverbial ‘Borg’. Seek to understand whether the intent is to allow your company to remain independent, and self-manage.
- Potential career growth opportunities. It is not a given that the new management team will be made up exclusively from the acquiring side.
- Financial upside. Equity payouts, shares in the new company, structured earn-outs may be on the table. However, even without these you may have the opportunity to renegotiate favourable terms.
Knowledge is power
The more you know about the deal before it happens, the more informed you will be and better able to shape your strategy. Understanding the deal structure itself to identify ownership structure, management plan and potential payouts is key. Beyond this, take the time to learn about the company culture, working style, benefits and promotion pathways on offer at the new firm. At a more granular level, study and assess the strengths and weaknesses of the team you’ll be joining and assess your future value to strategically position yourself in the new environment.
This can be relatively easy to do as negotiations take months and may be transparent to an extent. However, in other cases the decision is made far above your pay grade and you could wake up Monday morning to an announcement of new ownership!
Rule #1, prepare to stay and thrive:
Often, not all the answers to the questions we’ve explored above will be clear until after the deal is done and well into the post-merger integration phase. Be prepared for the best. Blind optimism is not what I am advocating for here; rather, control and influence what you are able to.
Identify the key actors. As the management structure becomes clear, identify who are the leaders, how they see success in the business, and what challenges they are benchmarked against. Build a picture of not only the business’ general direction, but the pressures that those above you are under. With this, you can position yourself to align and be most useful. Side note on this: be mindful of actors who may have been displaced and become disgruntled. It’s usually better to avoid being pulled into political battles, and instead focus on results.
Create your strategic value. This can be a great opportunity for you to step up. By identifying where your particular knowledge, technical skill-sets, relationships and experience are strong, you can position yourself as a key asset. Assess and benchmark yourself against people from the other side who may be in a similar role. A post-merger risk is that duplication of roles is likely to emerge, especially in cases of similar businesses combining.
Proactively solve problems. Despite the best intentions of motivated buyers, incentivised sellers and experienced consultants, no integration has been perfectly smooth. Problems will occur, friction will be an issue, cultures will clash and systems will be a mess.
Challenges = opportunities. If you are able to identify and lean into solving the inevitable issues that come up, you will be viewed favourably by leadership, and potentially create new promotion and growth pathways for yourself.
Rule #2, develop an exit strategy:
Not everyone will thrive in this environment. Especially at upper management levels where positions are limited, and in roles where duplication occurs an exit may be necessary. Even if your position or authority is not eliminated or diminished, the working style, new management, and career prospects may no longer be desirable.
Preparing an exit strategy in parallel with doing what you can to thrive is the best strategy. In any job change, people will factor in the trifecta of timing, role and conditions. If you can eliminate timing from the equation and focus on securing an exit that is an ideal position in a desirable firm at compelling conditions, it is ideal. In the case that you wait too long and the company pushes for your exit, timing becomes your overwhelming priority.
When should you start talking to your network and touching base with reputable recruitment agents? Early is always better. You do not need to have made up your mind to leave to initiate discussions with potential new employers. Be honest in discussions, manage expectations of both potential employers and professionals supporting you. You will not burn bridges by having conversations with potential employers and opting not to join them, provided you manage expectations wisely. Conversely, being viewed as passive talent will give you greater leverage in negotiations compared to someone who is clearly desperate to escape.
Negotiate
In almost any situation in an acquisition situation, you can negotiate to improve your position. Here are a few examples:
- Regardless of which side of the deal you are on, look to negotiate a promotion or broadening of your responsibilities.
- If you’re on the side being acquired, this is a chance to renegotiate your package to the new firm. More cash and stock options are the obvious targets; however in some cases the acquiring company needs the human resources of the target and are willing to offer cash retention bonuses to keep talent.
- If you have an equity stake, the opportunity often has negotiable pieces. Partial early payouts, transfer of stock value to that of the acquiring company, increase in equity portion for the purposes of retention or building in a lucrative earn-out clause.
- If you are to be laid off, the acquiring firm has a vested interest for this to go smoothly and for people to leave happily and not cause issues. Leverage this into a strong severance package to buy you time to find your next opportunity.
In summary – be proactive, not reactive:
All too often we see people simply go along with the flow and accept what comes down the line. The deal happened for the interests of leadership / owners / investors upstream of where you sit; so it is on you to look after your own self-interest.
Post-merger integration creates competition and challenge. Be a player, not a spectator.
Andrew Statter is a Partner at Titan GreenTech, an executive recruitment agency focused on the clean energy space.