Top NEO Payments for 2016 M&A Deals
In a world of increased regulation, transparency and
financial accountability there is one item that remains a constant thorn in the
side of shareholders: Golden Parachute
Payments.
In the M&A world, a target company will have safeguards
in place for the executives to maintain the quality of life that they
enjoy. In reality, these potential are
set in the employment agreement and although shareholders vote on them
concurrent with the merger vote, they will be paid.
In 2016, what executives made the most (or can potentially make
the most) due to their company getting acquired?
Top 10 Golden Parachute
Payments for 2016 Announced Transactions
|
Target
|
Officer
|
Title
|
Payment
|
NorthStar Realty Finance
Corp
|
David Hamamoto
|
Executive Chairman of
NSAM
|
$77,031,823
|
Johnson Controls Inc
|
Alex Molinaroli
|
Chairman, President and
CEO
|
$74,178,591
|
Time Warner Inc
|
Jeffrey Bewkes
|
Chairman and CEO
|
$69,119,189
|
NetSuite Inc
|
Zachary Nelson
|
CEO
|
$59,842,943
|
Anacor Pharmaceuticals
Inc
|
Paul Berns
|
President and CEO
|
$51,474,043
|
Tobira Therapeutics Inc
|
Laurent Fischer
|
CEO
|
$50,858,592
|
Harman International
Industries Inc
|
Dinesh Paliwal
|
Chairman, President and
CEO
|
$50,616,161
|
IMS Health Holdings Inc
|
Ari Bousbib
|
Chairman, President and
CEO
|
$48,521,684
|
NorthStar Realty Finance
Corp
|
Albert Tylis
|
President and CEO of NSAM
|
$47,590,490
|
Marketo Inc
|
Phillip Fernandez
|
Chairman, President and
CEO
|
$46,932,655
|
*Data
Provided by Spectrum Analytics
|
Obscene…However, looking closer at the underlying data,
there are a few things that make the values less repulsive.
The two Northstar executives are making this entirely through
the accelerated vesting of options (shares they earned by exceeding performance
goals, or through time served in company).
Of that amount, less than half is payable just for the merger
completing.
Most of the cash payments are double trigger* (i.e. they have
to be fired within a certain time after merger in order to get paid).
*Paliwal cash component is $14.64mil/double and a $1.27mil/single
combination.
Only two instances of gross-up payments (payments by the
company for taxes incurred by the executive for golden parachute amounts received:
‘Make Whole’ payments). Those include
$6.3 mil payable to Laurent Fischer of Tobira Therapeutics and $28,766 payable
to Dinesh Paliwal of Harman International.
What do shareholders in these deals get? Below are the 30-day per share premium’s received by shareholders.
Announced
|
TName
|
30DPrem
|
6/3/2016
|
NorthStar Realty Finance
Corp
|
3.36%
|
1/25/2016
|
Johnson Controls Inc
|
-8.28%
|
7/28/2016
|
NetSuite Inc
|
40.08%
|
5/16/2016
|
Anacor Pharmaceuticals
Inc
|
54.02%
|
5/3/2016
|
IMS Health Holdings Inc
|
0.57%
|
5/31/2016
|
Marketo Inc
|
43.18%
|
10/22/2016
|
Time Warner Inc
|
36.79%
|
9/20/2016
|
Tobira Therapeutics Inc
|
1563.62%*
|
11/14/2016
|
Harman International
Industries Inc
|
37.17%
|
|
*Includes a CVR of $49.84
|
|
*Data Provided by Spectrum Analytics
|
How does this stack up against other NEO CIC payments? The average ‘Payment to Equity Value’ (PEV),
which measures the amount payable to each Executive divided by the deal Equity
Value (price for common shares) was 1.45%
in 2016. Only four CEO’s received in
excess of this amount.
The chart below shows the top earners’ PEV:
Target
|
NEO
|
Pay Ratio
|
NorthStar Realty Finance
Corp
|
David Hamamoto
|
3.15%
|
Johnson Controls Inc
|
Alex Molinaroli
|
0.33%
|
Time Warner Inc
|
Jeffrey Bewkes
|
0.08%
|
NetSuite Inc
|
Zachary Nelson
|
0.68%
|
Anacor Pharmaceuticals
Inc
|
Paul Berns
|
1.07%
|
Tobira Therapeutics Inc
|
Laurent Fischer
|
3.13%
|
Harman International
Industries Inc
|
Dinesh Paliwal
|
0.65%
|
IMS Health Holdings Inc
|
Ari Bousbib
|
0.54%
|
NorthStar Realty Finance
Corp
|
Albert Tylis
|
1.95%
|
Marketo Inc
|
Phillip Fernandez
|
2.84%
|
*Data Provided by Spectrum Analytics
|
Target
|
NEO
|
Cash
|
Equity
|
Pension
|
Perquisites
|
Gross-Up
|
Other
|
Total
|
NorthStar Realty Finance
|
David Hamamoto
|
$0
|
$77,031,823
|
$0
|
$0
|
$0
|
$0
|
$77,031,823
|
Johnson Controls
|
Alex Molinaroli
|
$43,333,391
|
$24,081,995
|
$6,729,201
|
$34,004
|
$0
|
$0
|
$74,178,591
|
Time Warner
|
Jeffrey Bewkes
|
$44,522,603
|
$23,383,255
|
$0
|
$1,213,332
|
$0
|
$0
|
$69,119,189
|
NetSuite
|
Zachary Nelson
|
$1,150,000
|
$58,659,130
|
$0
|
$33,843
|
$0
|
$0
|
$59,842,943
|
Anacor Pharmaceuticals
|
Paul Berns
|
$2,649,385
|
$36,246,104
|
$0
|
$78,554
|
$0
|
$12,500,000
|
$51,474,043
|
Tobira Therapeutics
|
Laurent Fischer
|
$765,000
|
$38,783,522
|
$0
|
$10,070
|
$6,300,000
|
$5,000,000
|
$50,858,592
|
Harman International Ind
|
Dinesh Paliwal
|
$15,911,000
|
$27,643,613
|
$6,749,782
|
$283,000
|
$28,766
|
$0
|
$50,616,161
|
IMS Health Holdings
|
Ari Bousbib
|
$9,600,000
|
$38,921,684
|
$0
|
$0
|
$0
|
$0
|
$48,521,684
|
NorthStar Realty Finance
|
Albert Tylis
|
$0
|
$47,590,490
|
$0
|
$0
|
$0
|
$0
|
$47,590,490
|
Marketo Inc
|
Phillip Fernandez
|
$1,344,000
|
$45,588,655
|
$0
|
$0
|
$0
|
$0
|
$46,932,655
|
