by Jason Lemkin | Exit Strategy, Q&A
Q: After an acquisition, how long before severance packages are offered due to layoffs/downsizing?
Layoffs and downsizing arelesscommon in most tech acquisitions today. Why? Generally, most acquirers have decided its best to commit to mostly leaving teams be, and thus letting them continue mostly as is.
Having said that, even if they are less common, layoffs and other downsizing still happen all the time after acquisitions. There are roughly 3 phases:
- Right after the acquisition. Oftentimes, it’s determined many marketing, finance, and sometimes sales professionals are redundant. They’re often let go right after an acquisition, sometimes with a severance package.
- Sometime around Year 1 after the deal or so: after the initial integration is complete. The next time “redundancy” (I hate that term but …) is reviewed is once integration of the acquired company really begins. It often takes about a year to implement an integration plan. This often triggers a review of just who outside engineering is part of the go-forward team.
- A third review around Year 2 or so: when the acquirer decides how much to invest going forward. Around Year 2, a BigCo typically has to measure the experiment in the acquisition and see how it’s performed. This can result in shrinking the team down if it’s underperformed, or investing more if it’s performed well. Even if the decision is made to invest more, future headcount is often sourced from internal team members and processes. Either way can lead to some original team members being asked to leave in some fashion due either to not meeting expectations, or wanting to further integrate future investment within existing managers and orgs.
After the third review, the acquired product usually isn’t seen as acquired anymore. Now it’s an organic part of the acquirer. After that, any layoffs are generally just part of standard processes across all parts of the company.
