When it comes to corporate mergers, the acquiring company is almost always the sole beneficiary. The people in the acquired company are, unfortunately, viewed as excess baggage. This displacement of human resources typically creates a great deal of pain for the acquired company’s base of clients. The pain is often compounded by a tendency for acquiring firms to leverage the resultant reduction in competitors and implement dramatic price increases.
It is likely you are quite familiar with this scenario due to the consolidation that has taken place among the various companies that historically supported pharmaceutical manufacturers with commercial and government contract management, government pricing and rebate reconciliation as well as sales operations support and business analytic needs.
Do any of the following scenarios strike a nerve?
- A constant parade of new people assigned to support your business
- Service levels slipping and diminished quality of work
- Feeling like a small fish in a big pond when you were always a big fish in a small pond
- Dramatic price increases
The process of mergers and acquisitions alone can create immediate stress among employees. Uncertainty over what’s to come can affect a person’s job performance. Employee reaction is a key risk factor that arises whenever studies are done on the advantages and disadvantages of this growth strategy. It can hardly come as a shock that you, as the client, are going to feel the effects.
Chances are, many of the key resources you depended upon to make sure things were done right, on time and fully compliant are no longer part of the equation. Some employees who remain may be less invested in the work at hand, their energy and attention focused on their next move. New team members must try and get up to speed quickly on each client account.
When disruptions such as this occur in an environment where attention-to-detail is a major factor affecting success, your bottom line could be on the line.
Government pricing computations are filled with vital details. Missed transaction-level details can result in millions of dollars in lost margin. One of the more complex exercises in multitasking can be found in a generic pharmaceutical company seeking to implement a commercialization plan in the U.S. market. For both brand and generic drug manufacturers, Medicaid demands significant attention to detail. It is the most demanding government program in terms of financial impact and required resources.
The people responsible for your government pricing must pay strict attention to factors such as coding Class of Trade (COT), chargebacks, credit memo processes and a host of other key data. Bad or missing data affects the accuracy of government pricing computations as well as your rebate liability and undermines your profitability.
Everyone you count on must be on their game. The only way to protect against mistakes is to be meticulous. Being meticulous requires being fully engaged and informed.
Lines of Communication Sometimes Narrow
It’s not easy to keep everyone informed, including internal and external stakeholders. It becomes harder after companies merge, because the standard ways of operating get disrupted. After a merger or acquisition, lines of communications should be open as widely as possible, even to the point of redundancy to avoid missing critical deliverables.
Have you been on the receiving end of consolidation and still experienced this level of communication? (It’s highly unlikely.)
- Around-the-clock availability
- Proactive support
- Intentions communicated in a straightforward manner without jargon
- Sincere interest in your business to the point where you didn’t feel like a number
Standard Operating Procedures May Temporarily Disappear
Any absence or flux in standard operating procedure can open the door to misunderstanding and, possibly, errors in judgment and action.
If you’re working with an outside firm for services such as government contract management, government pricing and rebate reconciliation – and that firm merges or gets acquired – you need to hope the new entity maintains consistency in methodology for achieving compliance. Disciplined adherence to SOPs and compliant methodology are your best defenses against miscalculations and government intervention.
Corporate Culture is Elusive to Begin With
Research shows the link between strong corporate culture and lower voluntary employee turnover as well as operating profit. We each instinctively understand it. Businesses with strong cultures excel.
Creating a positive culture isn’t easy and it’s difficult to sustain. Larger companies with greater diversity of opinion, work habits and drive find it difficult to improve corporate culture. Current workplace trends, such as remote workspaces, also have taken a toll on culture.
When an environment evolves due to merger or acquisition, culture doesn’t always evolve with it. In the context of M&A, cultural integration becomes a bigger concern of senior leadership compared to leadership in companies that haven’t merged, according to a recent Dale Carnegie survey.1
What Everyone Intuitively Knows
The simple fact is that M&A is done to benefit companies, not customers. Companies that grow organically – especially service providers – typically make decisions about operations, process and customer service with the customer in mind. They can’t afford to alienate anyone because they’re not acquiring new accounts overnight. Organic growth strategy requires a reputation for a client-centric approach and real effort placed on the value of long-term strategic relationship.