The NASPP Blog

“Never again!”

These were the words uttered recently by a stock plan manager in reference to managing a “small and simple” merger project internally with no additional resources.

Relatively few stock plan managers found themselves in this situation last year. We saw a dramatic decrease in M&A activity in 2009, which is no surprise given the condition of our economy. However, the second half of the year did bring with it increased M&A activity, and news sources are all abuzz with anticipation for 2010.

Even though a merger or acquisition may be exciting for shareholders and a great way for a company to grow, it can be a serious undertaking for a stock plan manager. If an acquisition or merger is potentially in your future, start brainstorming now on what that project management will look like for you and your team.

The Left Hook

What’s the big deal, you ask? Just give me the employee and grant data along with the terms of the transaction, and I’ll throw it in Excel, work my magic and have the imports ready to process. (I mean, you should see how smooth my annual grant procedures are!) Well, if there’s one thing you can guarantee about a merger or acquisition, it’s that some part of the process of gathering and crunching your data will not go as planned. It could be something as clear cut as a spreadsheet with mismatched data (say names matched with the wrong SSNs) sent to you by the other company or a real doozy like finding out that the grants in an international location were actually all out of compliance with regulations in that country.

So, expect the unexpected when projecting the amount of time you’ll need to process the transaction and leverage your friends and peers who’ve gone through a merger or acquisition themselves. In fact, ask around at the next NASPP chapter meeting you attend and find out who’s had experience with M&A (even if you’ve done a few yourself) and ask them for just one issue they encountered in their transaction that they weren’t expecting. You can tuck those thoughts away in your “just in case” file and pull them out if your company brings you a merger or acquisition this year. If you’re looking for a more comprehensive approach to being prepared, enroll in our online education program, “Tackling Equity Compensation Issues Related to Mergers and Acquisitions,” and get a heavy dose of the due diligence considerations that you’ll want to know to put together a smooth transaction.

The Decision Dilemma

If you will be assuming any portion of the outstanding stock grants, then there are a lot of issues to consider. Converting grant data means really identifying the administrative, tax, and financial accounting consequences your decisions and finding the best balance for your company. For example, will you be converting just shares outstanding or including historical data as well? It may make sense to convert both outstanding and historical grant data because you will be acquiring ISO grants and dealing with shares purchased from an ESPP. Having the historical data makes tracking disqualifying dispositions easier. However, the “new” historical data will impact reports you run for periods prior to the transaction and you will need to accommodate the additional shares that will appear to be granted from your plan. For many issues, you will find that there all your choices have a downside. Decide what works best for your company by bringing other departments (like payroll and finance) in on the conversation and testing your strategies out in a mirror database before going live.

Think Outside the Box

So, that brings me back to the idea of how to manage your resources on a merger or acquisition. If you have a large stock plan management team and are dealing with a relatively small acquisition, you might be able to allocate enough resources to complete the transaction internally. However, if you are a one-person team or one that is already pushing the envelope on time commitment, you should give outsourcing a serious look.

Of course, you want to make the most of your consulting dollar! That means getting multiple quotes and asking the right questions. Ideally, if you’re getting help on your merger or acquisition, the individual or firm you bring in on the project will have experience with a similar transaction. However, no two transactions are the same. You know your company’s history, administrative priorities, and database best. It’s possible that you are the best person for the job or that your company is just not comfortable with handing over any part of the transaction to an outside resource. If that’s the case, you can still get help for your project. Think outside the box and bring someone in to help with your standard administrative responsibilities and free yourself up to focus on the merger or acquisition.

-Rachel