Closing the deal is a major milestone, but the post-merger integration process is where the real value is created. It may be difficult to believe, but the post-merger integration can be even more complicated than the deal itself.
Communication is critical during the post-merger integration process, from between the two separate owners to with employees and patients affected by the deal. Key parties involved in the merger need to be prepared to share information seamlessly throughout the transition. In addition, the whole integration process has to meet the physician owners’ expectations for key timelines and capturing synergies in growth and costs, and communication can help achieve a smoother transition.
Aside from communication, conducting the post-merger integration at a high speed is one of the most critical elements to a deal’s success. Taking proactive action within the first 100 days after closing the deal can significantly enhance the combination of two separate synergies into one, resulting in a successful merger. Practice administrators working in concert with a seasoned consultant must develop a well-structured plan for their post-merger integration efforts, which can vastly improve their odds for a successful outcome. This should be done before the legal documents are signed and the merger is consummated.
Complexities of Post-merger Integration
Many physician owners spend months of time and effort closing merger transactions only to stumble at integration. Oftentimes, buyers significantly underestimate the level of involvement in a successful integration effort. Common post-merger mistakes include:
- Failing to properly assess the resources to integrate and operate two businesses;
- Not addressing “people issues” and cultural differences of the dermatology practices;
- Losing focus after the signing of a deal;
- Not acting promptly, allowing key personnel to leave both organizations; and
- Overloading management with integration responsibilities outside their scope of expertise.
These mistakes lead to a lack of interpractice synergy as well as a significantly slower integration effort. This lack of speed during integration tends to compound other mistakes, making success more difficult to achieve.
Speed is of the Essence
Dermatology practices that move slowly during an integration process are vulnerable financially and competitively. The announcement of a merger between two groups creates uncertainty among employees of both organizations. It fuels anxiety-filled discussions about who will stay and who will be let go. Further, the community at large can spread all kinds of unconfirmed “alternative” facts, harming reputations.
Without proactive and effective communications, employee morale can suffer. The turbulence of an announced merger can give competitors a perfect opportunity to call on your referring physicians and even patients. In the midst of the confusion and transition, those key employees that you hope to keep may jump ship to other organizations. These dubious plans can harm the potential for success as well.
A slow response in retention initiatives (ie, retention of employees, patients, and referring physicians) during a merger can leave competitive doors open too wide for too long. Thus, decision-making must be streamlined for the integration effort to move forward.
Consider both big and small tasks during the post-merger integration. The completion of a few “quick win” integration tasks will bolster confidence in leadership. It will also keep the process moving forward. For example, one of the first things to accomplish is a staff meeting to discuss key human resource issues such as payroll schedule and benefits transition. Accomplishing these “smaller” tasks can also help maintain momentum as the merger begins to unfold.
A Plan of Action for Post-merger Integration
As I discussed in a previous column,1 strategic integration decisions should be put in place prior to the completion of the merger, because these strategic decisions may influence the deal terms and structure. It is important to identify these details and include them in the deal agreement before closing.
Ideally, a 100-day integration plan should be implemented when the deal closes. This plan should include identifying tasks to be completed, known issues, milestones, and planned timelines for completion. The 100-day plan should outline key details and considerations from both practices, and it should be formulated in planning sessions with functional department members from both sides of the deal. These joint meetings are essential to establish relationships between representatives of both practices in the beginning stages of the merger.
Once initial on-site discussions are completed, subsequent discussions leveraging virtual meeting technology can take place. The two together will result in more efficient time utilization and reduced travel costs. Virtual meetings may be necessary in this new age of social distancing as well.
If you think of a merger as a marriage, then you can see there is still a lot of work left to do after the wedding day. Yes, the “day in, day out” effort of the marriage takes patience and thoughtfulness, but it also tends to get messy. Compared to a marriage, the wedding is easy; the same could be said about the integration process vs the day the merger deal is signed.
The careful considerations and efforts spent planning for the post-merger integration highlights the value of both practices’ resources while emphasizing the importance of the deal itself. By nature of combining two office cultures into one, the merger is also highly complex, taking place under severe time pressure, and happens in parallel to running the core business. The contrast of the merger against day-to-day operations makes it one of the most challenging initiatives physician owners and practice administrators will ever undertake.
Communication
After a merger takes effect, strategic communication is central to the integration of the two dermatology practices into a more effective single entity. Thoughtful, planned communication shares important information internally (eg, staff) and externally (eg, patients, referring physicians). It also builds trust and helps maintains motivation in a time of relative uncertainty.
Practically, clear communication can reduce the impact of rumors and help to unify different parts of the new joint medical practice. By definition, this requires change communication, the process by which information is delivered to physicians and staff. This communication helps those stakeholders understand what is changing and why, and how it will specifically affect them.
Effective communication during the post-merger phase is required to ensure a common understanding of the business case for the merger and the vision for the future. It can help people understand and internalize change as well as keep the organization focused on patients and productivity. More importantly, communication can reinforce desired behaviors, promote cultural alignment, and help with retention and motivation of key talent. It can also help control the rumor mill, keeping competitors and bad actors at bay.
Good communication practices in the post-merger period include:
- Recognize that all merger goals depend on communication. Employees have to be persuaded to believe in the vision and to act to bring it about. This is a communication task.
- Know the communication goals. At all times, with all stakeholders, the goal for the communication needs to be kept in the forefront of the mind.
- Managers need to be aware of the logistical and cultural factors necessary to communicate with staff in all locations.
- Be flexible. Bring the best combination of communication techniques to bear on the situation and be prepared to adjust according to feedback.
- Dialogue is the richest form of feedback, but it is not the only one.
- Always communicate. Noncommunication is still communication because it sends negative messages.
- Follow a framework to help manage the complexity. Understand all stakeholders, know the goals, write a plan, craft messages positively and effectively, and select media carefully (eg, compare the difference between “We don’t expect any staff reductions,” and “There will be no staff reductions,” and even better, a more positive “We all have important roles to play in the future.”).
- Check senior managers’ commitment to the message and their ability to communicate it consistently, firmly, and honestly.
The Bottom Line
The secret to post-merger integration success is to focus on the strategic objectives of the deal, accelerate synergies, and build a high-performance medical practice. In order to be successful, a merger must be followed up with a detailed course of action.
Mr Hernandez is the chief executive officer and founder of ABISA, LLC, a consultancy specializing in strategic health care initiatives (www.abisallc.com).
Disclosure: The author reports no relevant financial relationships.
Reference
1. Hernandez N. Qualities of successful dermatology practice mergers. The Dermatologist. 2019;27(11):21-22. Accessed May 13, 2020. https://www.the-dermatologist.com/article/qualities-successful-dermatology-practice-mergers
