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Five people-focused strategies for getting the most from your M&A

Posted by Ian Wilcox

Ian Wilcox

Last week, I made the case that in an M&A deal, you need to pay close attention to the people components—not just financials. Today I want to share five people-focused strategies for maximizing M&A value over the long term.

Understand that some value drivers are not readily quantified. And even if they are, their specific interactions may not be—and those interactions may be essential. That is, the secret of the sauce may not lie in the ingredients, but in the cooking. Roche executives recognized this when they acquired Genentech in 2009, and looking back, the merger was a success. Genentech’s pipeline remains robust, and any fears that the merger would dampen innovation have vanished.

From the outside in, map how each company delivers value. For a pharmaceutical company, customers include not only patients, but payers, health technology assessment agencies, and physicians. Your company delivers different value to each of these stakeholders, and relationships with them drive revenue. Before, during, and after an M&A, you need to map these customer relationships.

Assess the quality of relationships.  Rooted deep in an organization are relationships with customers, regulators, key opinion leaders, and payers. The rapport employees enjoy with stakeholders is essential. Sound relationships with payers and regulators, for example, broaden communications channels with key decision makers, and over time contribute to approval and market uptake. To retain and build this vital rapport, you need to identify and preserve key people, skills, and behaviours.

Extend the time horizon.  The timeline for effective integration is more than 12 months. Capturing synergies is of course key to financial value. But it takes longer than 12 months for people to adjust to the new organization. They may take a new route to work; they may have a new business card and email address. But M&A prompts deeper emotional changes, too. People lose an old identity and gain a new one. They build new loyalties and ties, and they embrace a new vision. In addition to getting used to changes as mundane as new travel policies and the like, they are, crucially, taking on new roles in the many rich senses of that word. With a new job, they are gaining a new role in their families, among their friends, and in their communities.

Leadership must unite and focus on creating long-term benefits from the deal.  Executives at both entities must keep their eyes on achieving the long-term objectives for the deal, and be prepared to stay the course in the face of clamoring for quarterly returns. For this they’ll need a shared vision. That vision may be to exchange capabilities to create world-class organization, to combine assets to eliminate a rare disease, or some other worthy goal where the time horizon is years or even decades.

Successful M&A means treating value as more than the balance sheet, as more than economies of scale. If the pharma companies currently chasing revenue through M&A ignore the non-financial drivers of value, they will capture value, but they may also stifle it.

 

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