DD DuPont de Nemours Inc

   (FROM THE WALL STREET JOURNAL 1/13/16) 
   By Jacob Bunge and Rachel Feintzeig 

A feat of corporate and fiscal engineering, Dow Chemical Co. and DuPont Co.'s planned megamerger hinges on finding the right chemistry with about 100,000 employees.

Senior leaders who have spent decades at the two giants poised to be dismantled are coping with upended career prospects and attempting to keep their staff focused amid the merger of two companies with a combined value of $103 billion.

At the same time, they could find themselves in line for plum positions when the new company -- DowDuPont -- eventually separates the combined businesses into three units focused on agriculture, industrial materials and specialty products expected within three years.

Recruiters, coaches and executives who have weathered deals and integrations say it is a tough process.

"On one side of your mind you're saying, 'Tomorrow will be like today.' You go about and do your job," says Robert Lynn Oakes, who worked for Rohm & Haas Co. when Dow acquired the chemical maker in 2009. He stayed for three years afterward before leaving in 2012. "In the back of your mind, you're looking for opportunities," he said.

Executives aim to close the deal by year's end, and staffing changes are likely to follow. Corporate leaders have said they plan to eliminate about $3 billion in annual costs before spinning off the units.

The companies already have taken steps to shed thousands of jobs, separate from the deal. The moves also could put many managers in play.

John Touey, a principal with Radnor, Penn.-based executive search firm Salveson Stetson Group Inc., said executives typically become more receptive to outside recruiters 90 to 120 days after an announcement -- a time when leaders are still closing the deal, but can't yet execute detailed integration planning, he said.

"When an organization can't articulate what this executive's place is going to be in the new organization, the more of a flight risk they become," Mr. Touey said.

Edward Breen, DuPont's chairman and chief executive, said in an interview that he has spoken extensively with senior-level managers at DuPont since the deal was announced in December, stressing the scale and heft of the spinoff companies and instructing senior officials to spread the word among staff in an effort to reassure and motivate employees.

"The human capital side is the most important part of this," said Mr. Breen, who will be the CEO of DowDuPont.

At Dow, managers have grown accustomed to change following a decade in which the company spun off some businesses and bought others, said CEO Andrew Liveris.

Still, he acknowledged that portraying deals as "a win-win" for staff is difficult. "No one wants their cheese moved," said Mr. Liveris, who will be executive chairman of the combined company. "No one wants instability."

Privately, some managers at both companies say they are feeling upbeat about the merger-to-split plan. Yet others have begun exploring job opportunities elsewhere, say people familiar with the matter.

Their options appear limited, though. The slumping farm economy and slowing growth in overseas markets mean competitors are feeling pain. Monsanto Co. plans to cut 16% of its global workforce, while 3M Co. last year outlined plans to lay off about 1.7% of its workforce.

Mr. Breen, who separated multiple businesses at Tyco International Ltd. during his time as CEO there from 2002 until 2012, has said combining the two chemical giants will benefit managers -- after all, there will be three C-suites to fill, not one.

Mr. Liveris said he also is preaching focus and calm to keep workers on task, especially those whose jobs likely won't be affected by the merger. "The greatest risk during this period of uncertainty is you drop the ball on existing business," he said.

To gear up executives to lead the spinoffs, Mr. Breen said he and Mr. Liveris will include them in investment and strategy decisions well ahead of the breakup.

At DuPont, Mr. Breen is using uncertainty to motivate his managers, just as he did at Tyco, telling those in line to lead spinoffs that their future jobs depend on their teams' performance during the transition. "When I did this at Tyco, the excitement of these management teams. . .was so strong, they were working day and night," he said.

Annual executive turnover at merged companies have averaged double the normal rate for nearly a decade following deals, according to research by Jeffrey Krug, dean of the business school at Bloomsburg University of Pennsylvania.

"The greater degree to which you integrate assets, the higher the rates of turnover, because integration is disruptive," he said.

(END) Dow Jones Newswires

January 13, 2016 02:47 ET (07:47 GMT)

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