The Dow/DuPont Merger: What to Expect

There is little doubt – mergers can be frightening.  There’s a fair amount of complex uncertainty. Over my (and my colleagues’) financial planning careers, we’ve advised thousands of clients caught in the merger “wait-and-see” scenario.  While working with employees of DuPont and their spinoff companies for over 40 years, we understand the angst, risks, and nuances of a large merger (just like the pending Dow/DuPont merger/divestiture).

In all honesty, education and perspective are best to prepare for pending financial and life uncertainty. Below is a list of what to consider, expect, and formulate as you go through what could be a tumultuous few years.

1. One certainty – there will be plenty of uncertainty. In the infamous words of Jerry Garcia, “What a long strange trip it’s been.”  As mentioned above, Diversified has experienced 40 years working with DuPont and their spinoff companies.  There is always uncertainty, but how do you plan for it?  Control the controllable as best you can.  Don’t let unpredictability bother you.  Understand your potential options and get comfortable with several scenarios (especially the more complicated ones).  Playing out these scenarios with clients eases the anxiety.  It helps with education and clarifies decision-making.  Having a well-thought out financial plan will add tremendous value to this process.
2. What to do with your 401(k)? Your options are not clear; unfortunately, you are left with questions.  What will the investments within the new 401(k) plan be?  Will you have the ability to roll your old DuPont/Dow 401(k) dollars into your own personal IRA plan?  The timing is also interesting.  This is a unique situation where there will be a merger, then a divestiture.  The timing reinforces your need to have a good plan in place.  You’ll need to make good, timely decisions with the information as it comes forth.
3. Freshen up your resume! It’s prudent to consider the possibility of having to find another job. Find a career counselor/recruiter, talk to a professional resume writer, and start to get a sense for what you’re worth on the open market (i.e. talk to everyone). In my experience, there is lots of turnover during these events.  They may bring in people from the outside, consolidate your role, or decide you just aren’t a fit anymore.  Be prepared!  If you end up let go, you’re likely to get a severance package of six to twelve months.  Preparing now will put you in a position to hit the ground running.  Of course, it’s possible you find that you want to leave regardless of their decision.  Maybe you choose to pursue a more appropriate career path.  This is a great time to consider all of your options.
4. Pension, Pension, Pension! The DuPont pension is a hot topic. Last year, we witnessed them offering buyout options to thousands of ex-employees.  I expect many more rounds of this, to be honest.  Why would any company want to keep this liability on their books for the next 50 years?  I can tell you over 90% of our clients who were offered the buyout option last year took the lump sum rollover option. With help, they were able to weigh both options and run figures to help in their decision making process.
5. Expect an entirely different feel. I’ve seen this with Axalta, Chemours, and Koch to name a few.  Running a company that provides amazing benefits, while balancing work and life doesn’t often apply these days.  Expect your new company(s) to be run by investors and Wall Street. I anticipate benefits are slashed to meet the bottom line.  For instance, don’t expect a 9% 401(k) match anymore.  I don’t expect only bad things though.  I’m willing to bet these companies have a higher income scale then where you are at currently.

At the end of the day, there are risks in all scenarios and with every decision.  Hopefully this gives you insight on the big picture perspective, as well as the action steps you need to prepare.  Remember, those that fail to plan, plan to fail.  We are here to help and would be honored to support your (or your colleagues’) preparation for the pending uncertainty.  We’d be delighted to have a conversation – whether by phone, at our office, or just for a coffee. You name the time and place!  We’ll do our best to put you in the best position you can be.