Considering M&A? Do You Have a Post-Deal Integration Plan?
With M&A activity at an all-time high in the healthcare industry, you may be considering expanding your hospital or physician group through a merger or acquisition. Many organizations invest considerable time and resources up front to identify an appropriate target, conduct due diligence, structure the transaction and negotiate a deal – all to successfully get to closing day.
But that is where many organizations go wrong. They are often so focused on closing the deal that they fail to give proper consideration to what will happen after the documents are signed.
Mergers typically fail for one of two reasons: 1) transaction gap (i.e., “we paid too much”) or 2) integration gap (i.e., “the benefits weren’t delivered”). The second reason is far more common, with a majority of M&A failures being attributed to a lack of post-deal integration.
Poorly planned or lacking integration strategies can have disastrous results, including declines in productivity, employee turnover and leadership attrition. Perhaps worst of all is the erosion or destruction rather than creation of shareholder value. How would your shareholders react if a year after your signed a merger, their investment is worth half of what it was before the deal?
If your hospital or physician group is considering a merger or acquisition, it’s imperative to think about post-deal integration planning from the beginning. A firm with expertise in M&A integration and healthcare advisory can help guide your organization through the planning process so you can avoid common pitfalls and maximize the value of your transaction.
Across industries, these are some of the most common integration errors we see:
- Inadequate integration planning
- Lack of program leadership
- Lack of a formal and fast decision-making process
- Lack of executive alignment on merger rationale
- Too much time spent on organization politics
- Loss of focus on everyday operations
- Merger synergies not achieved quickly enough
- Customers and stakeholders forgotten
Your post-merger transition plan needs to account for change management, including employee training, staffing integration and cultural integration. On the operations front, considerations should include integrating your back office and identifying overlaps or gaps in your accounting and billing processes. On the technology front, you should have a plan for integrating IT and phone systems. Healthcare organizations may face a bigger challenge than most companies because they will likely have to integrate different electronic health records (EHR) systems and practice management software in addition to other systems.
You should also plan for any temporary or permanent changes in your operations that may result from the transaction. For example, many providers don’t fully account for the temporary loss of revenue that will initially result from trying to integrate disparate IT systems, staffs and workflows. It will naturally take some time to get back up to speed – which is all the more reason to plan for the integration period up front.
A strategic merger or acquisition can bring many positive changes for a healthcare organization, such as the addition of services, deepening of existing expertise, expansion of office locations, and addition of new patients. However, leadership has to be prepared to manage the changes and their implications across the organization.
Before entering into an M&A negotiation, you should invest time in post-deal integration planning, and consider engaging a firm with experience in both M&A integration and healthcare advisory who can provide guidance and assistance throughout all stages of the transaction. Having a strategic, effective post-deal integration plan can mean the difference between a successful deal and a disastrous one.
