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Healthcare organizations must better incorporate change management and cultural integration into their M&A strategy. Here's how.
Change management and cultural integration have the largest impact on M&A success, according to a new study by West Monroe Partners, a business and technology consulting firm, and Mergermarket, a media company specializing in corporate financial news and analysis.
Steve SapletalThe study found that 67% of executives believe that cultural integration is vital to deal success. Yet, more than half report value was left on the table in their deal due to lack of attention to cultural differences.
Furthermore, many organizations fail to involve the acquired company in the integration process. Only 50% of execs had the acquired company's management on the integration team, while only 25% used other key acquired staff members during the transition.
In fact, more companies are starting to realize the importance of change management. According to the study, 94% of company executives said they would place more emphasis on organizational change management in future integrations.
"Ignoring [the change management] aspect can put organizations in a tough position and end up reducing deal value," says Steve Sapletal, a director in West Monroe Partners' Minneapolis office. "Lack of attention to culture can also affect how the deal will turn out. While 67% of company executives believe cultural integration is vital to deal success, more than half said that value was left on the table in their deal from failing to properly merge cultural differences."
Here's how healthcare organizations can better incorporate change management and cultural integration into their M&A strategy.
Next: Acknowledge the human element
#1. Acknowledge the human element and the impact that it has on the deal.
"Consider baking a communication strategy and plan into your overall deal strategy," says Sapletal. "How will you communicate changes to employees? How often? What information is most important to them? These are the questions healthcare organizations need to take into account. Don't bury communications in another work stream. Have a dedicated team focusing on communications across all internal work streams and external constituents."
#2. Communicate and be honest. No deals ever come back and state that there was too much communication.
Decision makers that frequently interact and communicate with employees during a deal set a baseline for a solid change management program. According to the study, 76% of company executives said that communicating changes effectively to staff is one of the most difficult aspects of integration. On top of this, more than half cited keeping talent on board during an integration as a major issue.
"Acquisitions are always a crazy and nerve-wracking time for employees. They want to know how this change will impact their jobs and futures. Not communicating increases rumors and fear, leading to more trouble down the line. It's important to not leave employees in the dark," Sapletal says.
A best practice is to be honest, according to Sapletal. "If you cannot answer an employee's question, inform them you don't have the answer right now, but you are working on that and will get back to them by a specific date. Don't leave unanswered questions with no dates-[it] creates anxiety."
Sapletal points to the recent UnitedHealth acquisition of Catamaran for $12.8 billion as a good example where communication will be critical.
"The sheer volume of communication touch points in the UnitedHealth transaction will require a dedicated team specifically on communication," Sapletal says.
Next: Have a clear understanding of your culture
#3. Have a clear understanding of your current culture.
"Then develop an understanding of your target's culture," Sapletal says. "Now, you can look at both and make an educated decision on the best go-forward culture."
Healthcare organizations should also not be afraid to enlist expert help. "Talking with people with expertise in cultural integration and change management is a great way to gain more integration resources," he says.
#4. Know that that there's no "one size fits all" approach to M&A success.
The integration process is tough to navigate-especially when it comes to human capital and change management, according to Sapletal.
"Ensure that you have an executive leader sponsor any cultural change program. This has to be supported from the top," he says. "You do not want to start a cultural integration program unless you are in alignment that you will support the changes."