The Challenge of Merger Integration

Thursday, March 29th, 2012

The Challenge of Merger Integration

The Point (a blog) posted an interesting piece that lists the number of mergers in big pharma over the past few years. It’a a big number. The post discusses the risks of merger integration. it is worth reading.    M&A in Big Pharma: Holy Grail or Buying Time

Here is the comment I added to the post:

The long list of fairly recent mergers in pharma is a sobering reminder of the failure rate of these well-intended marriages.  I just wonder how many of these will end up being good for owners over the coming years. As you suggest, it is too soon to tell. Mergers often take a long time to work — or not.

I agree with the points you make about the challenges of merger integration. And, that on the day the merger is announced, people begin to worry about their jobs.

The focus of my work rests on two questions: Why do people support change? Why do they resist it? Merger integration could be a poster child for a conversation on those two questions.

I look at three levels of questions: Level 1: Do people understand what’s going on? Level 2: Do they get energized by the possibility of this merger? And Level 3: Do they believe that the leaders of the two organizations can work together in ways that do add up to 1+1 = 2.

If the answer to any of those questions is “no” or “maybe” then leaders are putting their merger at risk. They risk three types of resistance: I don’t get it (Level 1), I don’t like it (2), and/or I don’t like you (3).

A lot of mergers focus on what might be good for the company (positive Level 1 and 2) but fail to look at the situation through the eyes of those who will need to make this merger work. Too often, leaders pile on lots of data (Level 1) just assuming that’s what people need to hear. And, of course, they needs facts and figures, but these slide-heavy presentations often miss the (Level 2) emotional component – fear or excitement. And they certainly do little to build trust in the leaders of this new entity (Level 3).

My suggestions to leaders who are considering a merger are:

After you’ve done the due diligence, ask yourselves:

Do we know how to explain the reasons for the merger so that both organizations see why we want to bring these two companies together? (Warning: if communication is one-way, and way too heavy on details, people will tune out.)

Do we know how to engage people from both companies in the integration process? (It’s inevitable that some will be afraid no matter what you do, so focus on building a critical mass.)

Do people trust us (and our counterparts) to tell them the truth and handle this merger in ways that are good for the companies and the people?

My suggestion to leaders who are in the midst of a merger that is not taking hold:

Find out what the Level 1 (information), Level 2 (emotional reaction), and Level 3 (trust) issues are. What seems to be working well at all three levels, and what isn’t.

Since you probably won’t be able to work on all the issues, identify those that you believe have the most leverage potential. For example, let’s say people from the acquired company are afraid that they will be out of work. Assuming that downsizing will be minimal, do whatever it takes to assure people that you truly want to complete the integration process in a way that actually increases job security. Invite people into open conversation about ways to accomplish this. Allow people to be part of the change that affects them. The value of addressing a leverage issue is that it often dissipates some other concerns and it builds trust in the process.

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