You will hardly be surprised: people. High-growth companies will be challenged to justify record high valuations based on revenue growth only, they must firmly stand on the path of sustainable profitability. Hence, people (founders, executives, top and mid-level management and key employees), with their often unique skillsets, expertise, experience and reputation, will be instrumental to achieving and maintaining growth, profitability and the successful run of the business. They will be key for the integration of the acquired business and meeting the projected synergy and higher productivity goals.

Investors will want an optimal level of control over this aspect of the acquisition.

In legal terms:

• Due diligence with special focus on people/individuals, in various angles: (i) include (external) human resources specialists to conduct a specialist review and assessment (including reaching an overall conclusion on the firm’s culture, e.g. chances/risks for a cultural fit with the acquiring company, team and individual satisfaction, motivation and commitment, attrition rates); (ii) employment contracts and incentive plans (compared with market standard and most importantly with the acquirer’s existing contracts and plans, to be able to anticipate acquired team’s response to post-acquisition proposals for amendments to their current positions, employment terms and conditions; (iii) prepare and implement, where relevant, in a timely manner, restrictive covenants such as NDAs, non-compete and non-solicitation arrangements, tailored to the applicable law/jurisdiction, industry, position and specialism, and individual;
• Transaction documents – drafts must address that shift in the importance of people and the related risks, for instance, the transfer or business combination agreements are to include: (i) extended and tailored/industry specific reps & warranties; (ii) conditions precedent facilitating amicable/pre-agreed amendments to existing employment and management contracts, restructuring and reorganisations (please note that this will practically mean a more complicated and complex deal process due to including and managing new categories of stakeholders who historically have not been informed of a pending deal before its announcement and have not actively participated in the process on their own behalf – factor in the associated confidentiality issues); (iii) restrictive clauses, etc.
• Additionally, the new normal is that key people will have and will necessarily be involved in a deal in various, more than one, capacities: say, a C-level executive, who is also a shareholder or an option-holder, and/or co-inventor/patentholder/copyright-holder, and/or (co-)owner/shareholder in other companies outside the scope of the deal or not under the control of the acquired entity or the same control, and so on. Diligent transaction documents must provide for each and all realities and possibilities, without becoming overcomplicated.