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Home | Newsletter | UPDATE 2 | 2018 | How to manage mergers, acquisitions and divestments more successfully
June 21, 2018

How to manage mergers, acquisitions and divestments more successfully

New specialist knowledge in research, development and technology are the drivers for mergers, acquisitions and divestments in the life sciences industry. Many companies pursue a “Buy & Build” strategy – the acquisition of specific market segments to gain a leading market position. At the same time, they outsource production and packaging to focus on early, innovative phases of the product lifecycle. Mergers, acquisitions and divestments are therefore not only more frequent, but also becoming more agile.

 

This April, Servier, the second largest pharmaceutical company in France, acquired the oncology division of Shire. In the same month, Shire itself accepted a billion dollar acquisition offer from Takeda. Johnson & Johnson, Roche, Novartis and other global players have also attracted attention by acquiring departments or even entire companies.

 

Mergers, acquisitions & divestments - Dunja Hahn im Interview

 

ARCONDIS manager Dunja Hahn in an interview about mergers, acquisitions & divestments

Dunja Hahn is a manager in the Life Science Information Management department. With over a decade of consulting experience, she has profound multinational and cross-­hierarchy expertise in program and project management. Her focus is on organizational change and transformation management (OCM), including communication strategy and implementation. For the past three years, she has managed the divestments of several international production sites for a global pharmaceutical corporation.

 

Ms. Hahn, you have accompanied several mergers, acquisitions and divestments ­in your role as a global IT project manager. What is unique about this type of project?

I would summarize the challenges into three categories:

First: Complexity.

The high number of active stakeholders and functions in the form of local and global teams, potential buyers, vendors and external suppliers, as well as the linkages between business and IT, increase the complexity and can cause unclarity or stock-outs, or even disable business processes.

Additionally, external factors such as inspections, ongoing projects such as system upgrades or country-specific regulatory requirements must be taken into consideration. Due to these internal and external factors and dependencies, project management and budget calculation are often difficult.

There is also the “human” factor: the mindset of affected persons can change drastically. Some employees are concerned about the future or, after years of loyal service, do not feel valued and may even feel disappointed – motivation dwindles and frustration grows. Cultural differences, both country- and company-specific, increase complexity and create barriers.

 

Mergers, acquisitions & divestments - Newsletter

 

Second: Agility.

It is not only responsibilities, timelines or requirements that are constantly changing during a project, the scope can change suddenly and unexpectedly, as a result of the sale or closure of a location or department. Agile planning is crucial. Likewise, the team must be able to respond with flexibility to knowledge loss or experts due to terminations or restructuring measures.

Third: Uncertainty.

One of the greatest challenges of such a project is the uncertainty of what is planned.

When it comes to divestments, the contractual partner normally is not known initially. As a result, the requirements of the buyer, as well as potential synergies with the new owner are often unclear at first, and only becoming more concrete during the later phases of the project, or even when the contract is signed.

With mergers & acquisitions, there often is uncertainty about the extent of integration, including infrastructures, processes and applications of the two contractual partners. Anything is possible, from pure participation financing to a complete merger. This decision has a major impact on the subsequent harmonization process, addressed by the PMI (post-merger integration) activities.

The uncertainty is tangible – will the new buyer show up tomorrow with entirely different requirements? Or will the project be stopped suddenly?

The agreement can collapse just seconds before signing. All employees have to plan for this scenario, including a rollback, as well as be prepared for the “new owner’s” arrival, when it could happen that the previous managers and structures are still to be followed.

 

Behind the scenes: What challenges specific to mergers, acquisitions and divestments did you face in your everyday project life?

Personally, one obstacle is the initial small group of informed people able to discuss the details of the project. Negotiations are often kept under tight wraps until contract signing and official handover to the new owners. This presents both major and minor challenges on a daily basis. For instance, how do I obtain a complete application inventory to start the separation of the application landscape when the manager has not yet been informed about the imminent sale? These types of situations require a certain personal flair, highlighting organizational change management as a key success factor in such a project.

A divestment is always a unique situation. The affected local team members are rarely involved in projects of this type or dimension. Normally, the new owner replaces previous management with its own staff, causing major uncertainty at both the functional and personal level.

In my experience, even if these divestment projects are managed with a great degree of professionalism, it is essential to realize that emotions are involved and frustration is at a high level, especially for those affected by the change. They fear for their jobs, are disappointed, and in some cases, they even feel cheated by the company they were loyal to for years. Unlike with mergers & acquisitions, not all contractual parties to a divestment have the same entitlements. This is why instinct and a sophisticated organizational change management system are crucial for the project to be a success.

 

Mergers, acquisitions & divestments - Newsletter

 

Additional to these human reactions, responsibilities and requirements change over the course of the project, or the company may lack experts, as management and specialists tend to be the first to “abandon ship.” This could result in unexpected situations that would normally be inconceivable in standard business practices. It is essential that even trivial activities and matters of course be addressed – for example a handover of all passwords for existing systems and applications to ensure their continued availability.

 

How does one meet these challenges?

My tip: “Think big. Start small.” ARCONDIS has provided support for several mergers, acquisitions and divestments on both the business and IT sides. A good example is the migration of application landscapes following a company split.

To respond to changing conditions with a certain level of flexibility, we recommend project management with shorter planning cycles. The extent of integration should be determined as early as possible, ideally during the acquisition process. Functions and roles should also be clearly defined and reevaluated over the course of the project.

 

You named organizational change management as a critical success factor. What tips do you have as an OCM expert?

When it comes to emotional topics like a change in ownership or even a shutdown, it is important that those affected by the change, feel that they are taken seriously. This is why OCM should not be something done “on the side” – but should instead be a defined step in the process.

The goal is to break down both language and cultural barriers. It is nothing new when I say that training and regular status calls are necessary to prepare employees for new requirements and processes. It is important is to get feedback from those involved, and value their contributions. The best option is to take advantage of the existing meeting structure. As an example, a production site to be acquired by a CMO, held regular town hall meetings where we could give status updates during the project.

Personally, I try to be on site regularly to be available to the stakeholders. When making announcements, I prepare local management teams for the tasks ahead, but do not take a leading role myself. Changes are better received when their origin is not from an outsider, but are instead addressed and communicated by the local management team in the language or dialect of the individuals affected. An unassuming approach with a major impact. After all, those who feel being taken seriously and involved in the process will cooperate, which in the end benefits the project.


 

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