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Organizations that want to achieve deal success should try to focus on three areas: planning, organizational change, and target management.
Healthcare M&A deal activity is at an all-time high with the total value of deals reaching $95.3 billion the first quarter of this year. However, signing a transaction and ensuring its success is easier said than done.
Going through an M&A is a complex and challenging process, but organizations that want to achieve deal success should try to focus on three areas: planning, organizational change, and target management.
Here's more on what each of these areas entails:
#1. Planning. 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, nearly half of company executives started integration strategies at the negotiation stage. But to have a significant impact on the entire integration process, forming integration strategies should start much earlier.
Sapletal"Organizations should consider integration strategies at the beginning stages of the M&A process-this could be during the negotiation stages or even earlier," says Steve Sapletal, who is a director in West Monroe Partners' Minneapolis office. "Waiting until the end of the process doesn't provide enough time to nail down objectives and fully understand of the course of integration."
#2. Pay attention to organizational change. Overlooking culture not only leaves value on the table, but also undermines integration and creates conflict, according to Sapletal. "It's important that during planning, integration leaders incorporate cultural integration into the overall strategy. This means communicating changes to employees and keeping them in the loop. Most organizations need to work on their communication."
According to the study, 57% of companies see communication as a key area for improvement.
#3. Target the management team. An M&A means there are two parties involved, so the acquired company should play a large part in the integration strategy.
"Discussion with the acquired organization's management team needs to expand beyond price and asset negotiation," Sapletal says. "Their input will help refine and adjust the integration strategy to patch up any areas that might have been missed or ignored."
The study found that only 50% of company executives had the acquired company's management on the integration team, while only 25% used other key acquired staff members during the transition.
"It's important to have the acquired company's management on board as it helps streamline communication and information flow," says Sapletal.