Beyond the pure play of the financial transaction, virtually every merger and/or acquisition is an arduous journey upon which to embark with the potential of every challenge, from cultural clashes to tax implications. I’ve learned that a key and often overlooked element to a smooth and seamless integration is respect: respect for impacted organizations and employees.
Time and again, I’ve seen a pattern throughout the course of four integrations with which I’ve been involved over the last decade or so. All too often, Big Pharma swoops in and forces its way upon the acquired companies, forgetting that what fuels those companies’ success- which made them attractive targets — is, above all, the people.
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The fact of the matter is that understanding what inspires those people is key to orchestrating a successful transition that allows everyone to succeed. In general, employees at smaller companies have different motivations than large company employees, so it’s important to create a shared vision.
Those who seek out larger companies enjoy many benefits – stature, resources, benefits, development opportunities, large budgets, and job security. They also benefit from being part of robust, matrixed organizations with high-risk tolerance- and, in many cases, to be candid, a lack of direct accountability for major corporate decisions. Whereas those who are attracted to smaller companies tend to be more mission- and purpose-driven, roll-up-your-sleeves- risk-takers, who are innately entrepreneurial and innovative. They tend to be more likely to be calculated risk-takers, who thrive by taking direct accountability in nimble, fast-paced environments.
Understanding these motivations and nuances is critical. Acquirers, whose purpose for M&A is solely financial, easily ignore what made a company successful when running the numbers, but they must consider culture and people when they integrate. Cultural words may be the same, but they are lived differently at different companies. Culture is a way of operating and that’s often the mismatch between companies. A big company can’t force a smaller company to come along – it will lose those who built the success that made it attractive.
So, how can organizations of vastly different sizes seamlessly come together? Here are some ways large companies can be more thoughtful in bringing key personnel along the journey with them and help deliver the value they envisioned:
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Ensure transparency throughout the integration process. Be clear about the people who are part of the integration process, ensuring parity from both parties by reaching across similar functions of the organization to demonstrate inclusiveness in the process.
Involve the CEO and other key executives early in integration discussions. The impacted CEO and executive team know the company and employees better than an acquirer. Their early and active involvement helps the integration advance as smoothly as possible for the acquirer.
Take the time to understand the culture and what it means to employees before acting. Seek out examples of how impacted companies conduct daily activities, how people communicate with one another, what key processes look like, how management interacts with employees, the level and kind of internal communications, and what culture-building efforts take place. Big company executives can’t imagine what it’s like to be in a smaller company unless they make the effort. Too often, they just don’t. That’s why integration communications toward employees typically are transactional and tone-deaf, rather than making a true effort to understand.
Recognize key drivers for smaller company employees. It’s normal to expect a high rate of attrition following equity and bonus payout upon change of control. Big name recognition, perceived cache, and more money aren’t motivators for every employee, so speak with HR leaders early before constructing compensation packages. Sales teams, for example, may prefer smaller companies and have clear reasons why they left Big Pharma in the first place. Upside potential through equity, innovation, and the ability to take risks are what attract certain employees; there are many other companies that offer that.
Establish realistic timelines that make sense for both companies. Time is a fixed continuum. Companies with smaller employee footprints do not take less time to complete certain actions. Integrations need to account for people’s schedules, availability, vacations, holidays, etc. Don’t create artificial timelines that force action; delicate conversations should be handled correctly and with sensitivity.
Exercise humility. It has to be said that many Big Pharma companies regularly demonstrate a level of arrogance in the way they behave towards acquiring companies – through exclusion of key impacted company executives in decision-making and integration planning and lack of transparency along the continuum. They set themselves up to fail and breed antagonism when they establish an “us vs. them” structure in meetings. This becomes evident to employees very early on and further alienates them from wanting to stay in the newly acquired company.
Avoid over reliance on third parties. I’ve seen a tendency to heavily rely upon the advice of management consultants and agencies. While these third parties can add real value in targeted ways, the truth is that many management consultants have no practical organizational experience and little-to-no real-world work experience in the industry. In addition, agencies often are tasked with developing communications materials without an understanding of what is truly happening, what sounds authentic, or what impacted employees want to know more about. As a result, crucial communications that are meant to create a seamless transition appear disjointed, off the mark, cut-and-pasted and result in ineffective efforts at assuaging impacted employees’ concerns.
Above all, my advice boils down to acting with respect and exercising empathy. Integrations are incredibly destabilizing and stressful for impacted employees, as well as for those who “survive.” Organizations that are worth acquiring are successful and attractive because they are comprised of smart, talented people who have created that success. Remember the Golden Rule, exercise humility, respect others, and practice empathy, and you’ll be better positioned to succeed in the long term.
Photo: maxsattana, Getty Images
Samina is a Biotech Executive & Strategic Advisor with a distinguished track record of value creation through notable acquisitions within the biopharmaceutical industry worth over $40B. Samina partners with CEOs and boards of companies at various stages of transition, whether private, public or IPO-ready and from early-stage to commercialization. She has strong operational experience, a governance/compliance mindset, fiduciary stewardship, and DE&I leadership.
Samina has 30+ years of success in delivering outcome- and analytics-driven results in complex and competitive businesses. With expertise in company transformation and exit preparation, she reframes investment theses to influence and increase value perception. She is a seasoned company officer and was an Executive Team member at NASDAQ: AIMT, NASDAQ: AXON, and NASDAQ: PCYC. She is certified in corporate board governance and is actively seeking board opportunities
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