Mergers and Acquisitions- what does Change Management mean for them?
By: Shivangi Walke
Tags: Change Management, Mergers And Acquisitions, Vitalsmarts, Shivangi Walke, Influencers

A couple of years ago, I worked with a small Biotech which was focused on one core offering and were on the way to being acquired by a large research-based Pharma. The Biotech got to continue the pathbreaking work it was already doing in its one core offering, albeit with deeper resources at their disposal.

I was curious to see if there would be any culture change now that it had been acquired by a larger company and had much more at their disposal.

Glassdoor and Indeed reviews for the small biotech were favourable. It was interesting to see how employees acknowledged that the culture had evolved and they were quite at ease in accepting it as one of the outcomes of the acquisition.

But the acquisition itself wasn’t an easy task. Trouble stemmed within the various factions of the large Pharma, ‘from differing assessments of the Biotechs’ innovative capacities to conflicting philosophies of risk within its own management team. Their investors were on the verge of backing out because they didn’t agree with its research strategy, and its philosophy of risk. But the management at the large Pharma insisted that they were learning how to make wise choices in drug development, and improving its chances to create innovative first-in-class therapeutic products for unmet medical needs. Their CEO is famous to have said “What’s on the balance sheet is not as important as a culture of innovation and being able to bring something to patients which then creates value for everyone. The market and shareholders don’t always understand this, but it’s the only way for our company”

This resolved all the internal strife that they were facing and got in renewed focus on research; which ultimately led to the acquisition by the large Pharma.

This kind of culture was what the large Pharma was buying into, or probably the other way around. From the very beginning there was the obvious difference in size to consider and what that meant for a research based unit.

Innovation is largely stifled by large units, and the small Biotech ran on innovation.

How do you let an acquired company retain its culture because that’s the bedrock of their performance? How do you ensure that the acquiring company doesn’t assert territorial rights and expect things to change magically with their new teams?

What happens when organizations go through change?

When organizations go through change, resistance is to be expected and managed. Change management creates pockets of acceptance, of dissent and of resignation to fate. While it is tedious legwork to stitch in the process and structure pre and post change, it helps to manage the people aspect as a project too, this means the job roles and the culture. Experience suggests that it is supportive to inform the top and middle management upfront and to use them as multipliers.

Managing change needs to be tailored to the specific situation. Business leaders put people, culture, change management and communication as the top reasons for integration failure. Fortunately the large Pharma had a sophisticated understanding of acquiring companies and it put this understanding to good use.

They understood that people across the rungs, even those who have been actively rooting for the change have questions:

What do I actually do to get started? What approaches and tools do I apply, and when? What matters most?

The new integrated entity needs deliver on the base business, align strategies, put a new organisation in place, and realise synergies.

Managers need independence to stay invested in the outcomes of the change process. Personal motivation is a huge factor here — People choose their behaviors based on what they think will happen to them as a result. If you need people and managers to stay the course, focus on creating new experiences and new motives — clarify what’s in it for them, this may not always be pleasant news, as some jobs will be redundant and others will need to be reshaped. But usually there is tremendous learning during the integration phase and that’s valuable too.

Your objective is that the employees are running the change, owning the actions, decisions, consequences and results.

While managing change, it is better to be judged on the Final score card at the end of the change period rather than on every stroke, and not second-guessed in a way that is inappropriate.

It becomes even more important during the integration phase to define accepted behaviours.

In the various pockets of acceptance, dissent and resignation, induce peer pressure to not deviate from the desired behaviour. Teach them to use that social support and social motivation in their own favour.

Find opinion leaders and Influencers who will be mouthpieces and implementation champions for the change process .

The small Biotech was mainly about better innovation, better drug accessibility and usage — and that was of immense value to a global giant like the Big Pharma. That was essentially what they wanted to preserve and possibly nurture. And from what I see, they succeeded.

Not all change management processes need to be about changing the culture, some could be to protect the better parts too.

Sometimes the more original a realisation, the more obvious it seems later.

This article was first posted on LinkedIn on July 03, 2019.