Whew, the merger deal is closed and the dust has settled. Or has it? In our previous two segments on M&A (See here and here), we talked about preparing for and navigating the process of a merger or acquisition. The path to M&A closure and integration can be a challenging one, fraught with minute details - to which critical attention must be paid. Our previous segments focused largely on getting from point A to B - how to take stock plan data from two companies and integrate it efficiently, with minimal pain and errors. Now that the deal is done, we move on to the final stages of ensuring a successful integration, the steps that occur largely after the transaction is complete.

Employee Communication

M&A may be one of the few areas where advance communication is not always possible. Even when permitted, what can be shared in advance may be extremely limited due to factors such as confidentiality or lack of finite certainty about the details, and that makes advance communication challenging.

While it may not be feasible to disseminate detailed information to stock plan participants in advance of the transaction close, it is possible to put together a communication plan BEFORE the transaction closes, even if you must wait until closing to execute the plan.

What to Communicate

When communicating about M&A to stock plan participants, put yourself in their shoes. Anticipate the questions that they will need to know. Such anticipation and proactive planning can greatly minimize the number of inbound, one-off inquiries that flow into the equity administration department. Typical areas of question for employees involved in an M&A situation include:

• What will happen to my stock options/awards?
  • Address what will change, including number of shares due to conversion ratio, and any 'triggers', such as acceleration of vesting, cash payouts, etc.
  • Address unchanged variables , such as retention of original term and/or vesting schedule if applicable
  • Address implications on shares held outright, such as those previously acquired from an ESPP, stock option exercise, or award vesting
  • Don't forget former employees who may have outstanding stock options, or previously acquired shares
• Where are my stock options/awards?
  • Where can the participant access information about their stock plan holdings? Are there changes to vendors/brokers? If so, what is the new process to access stock plan data?
  • Are there any nuances to how stock plan data will appear in a participant account? For example, did the original grant date become the acquisition date for administrative purposes? Describe any changes to appearances of data that may be seen and misunderstood.
• When can I access my stock options/awards?
  • Are there any restrictions on when/how participants can access my stock plan holdings, other than those contained in the terms of the award Agreement?
• What is the expected process for issuing stock options/awards going forward?
  • Was there previously a routine grant practice, such as an annual grant? How is that expected to change in the new environment?
  • Are there any changes to eligibility requirements for granting stock options/awards in the new environment?
• Where can the participant find additional information?
  • Consider creating an email address or designating a dedicated contact for employee inquiries
  • Consider establishing a 'library' of relevant information on an Intranet, broker online website or other source

Employee communication is an area where the means is just as important as the message. If you're going to go to the effort to communicate with employees, then invest equal time in ensuring you're utilizing effective communication channels.

Our favorite communication methods for M&A include:

• Employee Statements: the old saying that 'a picture is worth a thousand words' applies. It's important to explain any conversion ratio formula to employees. In doing so, provide a visual of how this applies to their personal situation. A customized statement showing the 'before' and 'after', along with the 'middle' piece (the conversion calculation) can go miles towards ensuring employees understand how the M&A action applies to them individually.
• FAQs: M&A is an area where there tends to be many questions. With some planning and careful thought, you should be able to anticipate most questions. Answering them proactively, in the form of an FAQ, will help employees to find quick answers, as well as minimize the number of incoming and redundant inquiries to the equity department. Tips for an effective FAQ include writing a list of all possible questions, and then answering them. You may even consider grouping related questions together and creating 'categories' or a table of contents to simplify the process of finding an answer.
• Meetings: meetings can be an effective forum for interaction during a confusing and critical time. While face to face contact can be beneficial in communicating, we also see a large number of clients utilize web tools to host meetings via conference call and Internet. This allows the Company to reach employees globally on a timely and efficient basis. Consider permitting employee questions during these meetings - there may be an FAQ that you hadn't thought of that can be widely addressed.
• Email Staging: one common mistake is when a large amount of information is distributed in a single, solitary communication. Many times the Company thinks they've put all the information out there, so it must be understood - communication done. Rather than putting ALL the communication eggs in a single basket (e.g. one communication), consider staging the communications such that you filter a bit of information at a time, and as you build one communication upon the previous one, you REMIND, REPEAT, REMIND, REPEAT. Repetition can be important in complex scenarios such as M&A, and multiple communications provide the opportunity to refresh previous information without taking on an overwhelming feel.
• Visual Aids/Guides: If you are introducing new information, such as a new vendor, it may be helpful to have supplemental information available - such as a step by step guide, with screen shots, on how to activate/access the account. Other supplemental information could include a chart of commissions and important URLs, email addresses, phone numbers that participants can have readily available in a consolidated format.
• Appropriate Staffing: responsiveness is a critical component of any communication plan. As much as you proactively communicate, there are bound to be questions. Ensuring you are appropriately staffed to handle inquiries on a timely basis will help avoid backlog, stress, and a negative impression of the communication process.

Jennifer Namazi, CEP, Director
Stock & Option Solutions
jnamazi@sos-team.com

Jennifer Namazi is a Director in the Strategic Solutions division of Stock & Option Solutions. At SOS, Jennifer's focus is to help clients ensure they have the proper practices and infrastructure to implement and support their equity plans. Jennifer approaches her clients with an eye towards best practices and providing general strategic guidance.

Prior to joining SOS, Jennifer spent more than 10 years working in various corporate equity administration positions ranging from administrator to senior management for companies such as Adaptec, Broadcom Corporation, Oakley Inc., and Sicor Pharmaceuticals. Jennifer earned her Certified Equity Professional designation in November 1997. She has been actively involved in various organizations such as the NASPP for several years as well as served as a volunteer for the CEP Institute. She is a past program Chair for the San Francisco Chapter of the NASPP, and served on the CEP Advisory Board from 2002 - 2009. She frequently speaks on current and emerging topics for industry organizations and events, such as the NASPP, GEO, and SOS.

Product Spotlight Sequel: SOS 6039 Services & Solutions

Attendance was high, and the response we received from companies looking for a simple and cost-effective solution has been amazing. To streamline the proposal process, we are asking three simple questions which will allow us to deliver a customized proposal and pricing within 1-2 business days. If you are interested in our solutions, please email us with answers to the following:

1. Do you need it for ISOs or ESPP (or both)?
2. How many participants do you have (for each)?
3. Paper or email participant statements?
   • If email, are you interested in the consent collection website?

SOS Across Our Desk: Equity Compensation in the News...

Repricings
An excellent blog from Barb Baksa, Exec Director of the NASPP, re: a study on the "impact" that repricings (aka option exchanges) have on company performance.

TARP
Accounting Considerations Related to the New Policies Proposed by the Special Master for TARP Executive Compensation are covered here.

Big Happenings
Solium acquires North American employee stock option and Transcentive businesses of Computershare.

IFRS
US adoption of IFRS remains "highly uncertain".

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NASPP Conference

SOS Xposé

Nuptials...Jennifer Bertagnolli, a Client Manager at E*Trade, was married in South Lake Tahoe on Sunday, August 8th to Marc Wallace...Christine Deleo, a Senior Solutions Specialist at Transcentive/Computershare, recently got engaged to her long time boyfriend, Mike Ross, who also works at Computershare in the Corporate Governance Services group.

On the move...Alison Wright has joined Baker & McKenzie, and will be working out of their San Francisco offices. Alison will be working on Executive Compensation and Employee Benefits as well as U.S./domestic equity compensation issues.

There is a Doctor in the house...SOS would like to celebrate one of own, Andrea Best, who graduated with her Ph.D.in Comparative Studies from Florida Atlantic University on August 10, 2010. Her research focuses on sustainability, ethics, environmental justice, and complex systems thinking. We have some pictures from the ceremony here and here. Great job, and congratulations Andrea!

SOS at SF GEO on Thursday...Elizabeth Dodge will be there, speaking on how to get more use out of the internet, both for participant communications, career development and internal (and international) stock plan group communications. Learn more at the link, and don't forget: it's not too late to register!

Happy Belated Birthday...Laura Verri of Computershare recently returned from her vacation and birthday celebration with friends in Spain. Having a birthday that falls on the same day as the town fair there paid dividends, as she not only got cake, but a parade and fireworks! http://www.globalequity.org/geo/node/344

CEP... Registration for the November 6 CEP exams closes on September 24. There is a lot at stake with equity compensation. Make sure you have the right skills and expertise...And mark your calendar for the CEP Symposium on December 8.

Conference News...Wendy Davis of Cooley forwarded us the details for their 3rd Annual Jumpstart Your Year-End Compensation Decisions conference. Click here for more information.