TD Bank had to negotiate twice in its $1.3 billion bid for U.S. investment bank Cowen: first with the board, then with executives. The $200 million retention bill is high, but just half what it could have been, writes johnsfoley.
for $1.3 billion was a small bright spot. It also gives a clue as to why acquisitions of teams of sharp-elbowed dealmakers don’t happen more often.
It's not unusual for executives to have so-called golden parachutes that trigger when their company is sold. But typically they can only rip the cord in certain circumstances, such as if the new owner fires them. The requirement that a payoff depends on both a takeover and an ouster – known as a double-trigger – gives investors some protection against managers holding the company to ransom, and such provisions are now standard at U.S. companies.
TD, which already has a chief executive in the form of Bharat Masrani but wanted to keep Solomon too, therefore had little choice but to negotiate. In the final agreement, the Cowen executives will get cash when the deal closes and swap their unvested equity in the investment bank for shares in TD. The headline value of that package is just over $200 million. Compared with the $400 million TD might have had to pay, that sounds like a bargain.
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