Life Sciences and Healthcare Services

Faced with rising product development costs and stagnant organic expansion, many life sciences companies see mergers & acquisitions (M&As) as the key to future growth. Yet numerous studies in recent years reveal that between 50-80 percent of M&As fail to produce their anticipated benefits. Why? In most cases experts agree that poor post-merger integration, and especially talent management, is largely to blame.

In their bid to secure strategic assets many firms fall into the trap of overlooking the importance of talent in the M&A process. In other words, they fail to assess which leadership skills are critical to success under the changed circumstances and do not make appointments accordingly. In many cases companies also fail to forge or articulate new career paths for high-potentials in the wake of an M&A. Such poor people decisions can not only destroy value by putting people in the wrong roles, but may also encourage top talent to look for the exit.

Firms seeking to avoid the various talent traps related to M&As and boost the likelihood of their success need to follow a rigorous Management Appraisal process when appointing leaders to key roles and building the new team. This process is based on a set of core principals:

• Factor in the complexity of the new organization: the complexity of roles with the same title may increase significantly in the post M&A organization
• Ideally design roles that are best for the business, not for the people – an effective appraisal process starts with a blueprint for the new organization and careful thought about the criteria for success in key roles.
• Assess leaders for competencies that fit the new organization, not for nominal experience: leaders that excelled at a function in a small environment may struggle to come to terms with the complexity of a M&A, which calls for sophisticated team leadership and talent development capacities.
• Distinguish transitional leaders from long-term leaders: discuss the future openly with transitional leaders and highlight the development gaps that make them unsuitable for the long-term position.
• Move with deliberate speed, not haste: pressure to find fast solutions to people decisions should be resisted. Uncertainty can also be addressed with a well-publicized deadline for personnel decisions.

The vast majority of companies continue to undervalue the talent component of integration. Talent deserves as rigorous a treatment as product integration, customer retention and systems optimization. Those companies that focus on aligning their talent to the new organization and objectives dramatically increase speed of integration and the likelihood of an acquisition creating value for shareholders.

For further insight, download "Beating the M&A odds: Factor in the talent” published by Egon Zehnder International.