Post-merger integration parallel to day-to-day business - not possible? But it can!

Whether pharmaceutical companies are successful and achieve their growth targets generally depends on them having a promising pipeline and a specialized product portfolio. This cannot always be achieved organically. Acquisitions of new active ingredients or entire companies are often required. The success of a company merger depends on post-merger integration. In this article, our interim manager explains how a company merger can run as smoothly as possible.

Why are post-merger integrations individual challenges?

What only occurs occasionally in small and medium-sized pharmaceutical companies is part of day-to-day business for large corporations: a company merger. While one company acquires patents, licenses or entire companies, another expands its business model by acquiring an innovative start-up. Precisely because takeovers differ greatly, a standardized approach to post-merger integration (PMI) is not very effective. It requires individual approaches, the core of which is usually about integrating two companies, including their products, processes and employees, in an economically and operationally holistic manner - as unnoticed and without disruption to day-to-day business as possible.

Why are there countless decisions to be made during post-merger integration?

The complexity of PMI projects varies greatly depending on the type of business combination - from the integration of a small unit to the integration of several production plants. What all mergers have in common is that there are numerous decisions to be made that are as intricate as they are complex.

• Does it make sense to take on experienced employees, long-standing suppliers and functioning processes? Should all business relationships be continued?
• Should production or company locations be relocated? How does this affect integration and corporate goals?
• What are the consequences of the merger in terms of sensitive supply chains?
• Which assets should be divested before closing for competitive reasons? How can the necessary separation of personnel, processes and data be ensured without negative implications for the merger?
• Where does outsourcing make sense? Which activities can be done better in-house?
• And what does the merger actually mean for the employees on both sides?

As a rule, preparations for post-merger integration only begin after the official transfer of ownership, but waiting until then to start the preparatory work would be fatal. If employees, customers, suppliers, partners and other stakeholders do not feel sufficiently informed, this creates uncertainty - an ideal founding ground for rumors and speculation.

Why is no two post-merger integrations the same?

The merger of companies often aims to retain not only the assets but also the specialist expertise of the acquired company. This is why personnel issues are very important in post-merger integration. An initial measure is to communicate the planned takeover as early as possible - even if the official closing date has not yet been set - and to keep employees regularly informed about the next steps and what has already been achieved. Once appropriate communication channels have been established, post-merger integration must be prepared on at least two levels:

• Technological/process-related: Systems need to be integrated, processes modeled, data consolidated and made centrally available.
• Cultural/communicative: Employees must be brought on board from the outset and transparent communication must be ensured throughout the entire project. Professional project and change management are essential.

The strategic and operational measures to be taken depend on the company's individual starting situation. SMEs face different challenges than groups when merging companies.

Post-merger integration: challenges for small and medium-sized enterprises

• consider post-merger integration to be a singular project. As a result, they are usually unfamiliar with the associated tasks and challenges.
• With their data history, some of them are still on the threshold from analog to digital processes.
• Usually, neither the management nor the individual specialist department has an exact idea of what exactly needs to be done during post-merger integration.
• As a result, the company quickly realizes that it also needs external support and specialist expertise.
  

Post merger integration: challenges for international corporations

• Many people are familiar with post-merger integration and assume that all PMI projects can be carried out in the same way. However, global experience and best practices cannot be transferred due to country- and company-specific differences (e.g. contract law).
• If post-merger integration is carried out without taking individual specifics into account, there is a high risk that it will fail or at least massively disrupt day-to-day business.
• Unusually, management is not involved in the details of post-merger integration.
• Flexible, external specialists often support post-merger integration
  

Why is transparency essential in post-merger integration?

Whether two medium-sized companies are merging or a corporate group is involved, it has proven to be a good idea to rely on interdisciplinary project teams that include both in-house employees and external experts. The advantage: while internal project managers are familiar with existing processes and stakeholders, external interim managers question historically established routines, point out new perspectives, contribute additional expertise and provide operational support for post-merger integration. The pharmaceutical company must play its cards close to its chest for this. In order for external experts to draw up a needs-based roadmap for post-merger integration and drive its implementation forward effectively, they need a complete overview of the initial situation and any hurdles. This means: companies that bring in external experts for post-merger integration should grant them access to sensitive information.

Checklist: What makes interim professionals suitable for PMI projects?
💡Have experience with PMI projects.
💡Know how to implement pharma-specific requirements.
💡Know about process integration and monitoring.
💡Are excellent agile project managers.
💡Always maintain an overview.
💡Orchestrate a wide variety of workstreams.
💡Maintain stakeholder- and valueholder-oriented communication.

How do interim professionals support post-merger integration?

Some medium-sized pharmaceutical companies believe that they can manage post-merger integration on their own. Experience has shown, however, that the management or project management is not familiar enough with the processes in the specialist departments, while those in charge are not familiar with the strategic roadmap. Corporations, on the other hand, face a different challenge: global PMI project teams often lack knowledge of local conditions - for example with regard to national corporate, labor and tax law. Either way, external experts know what needs to be done and hold the reins - in all areas of post-merger integration. Overcoming the following five challenges is one of the core tasks when merging companies:

1. Core task in a merger: taking employees with you

Even though the goal of a merger is usually to generate growth and maximize profits, it is the staff who support the merger. The employees of the acquired company are often sceptical about post-merger integration - sometimes even rejecting it. It is therefore crucial to involve the employees of both companies in the change process. For example, employees and managers alike want prompt and transparent communication with regard to their future role. Discussing these and many other PMI aspects at an early stage increases acceptance of the merger and opens up prospects for actively shaping one's own future in the new company.

2. Core task in the merger: creating a professional team with leadership potential

Most employees in the pharmaceutical industry are specialists. Many do not know whether there are interfaces with other departments or whether there are dependencies. Because cross-departmental projects tend to be an exception in many places, large parts of the workforce often lack awareness of overarching topics and processes. Specialized interim managers initially create a mutual understanding of each other and promote a joint effort towards the defined project goal. This enables employees to identify and (further) develop overarching topics together during the course of a company merger. This is because team-internal interaction is crucial for the success of targeted company mergers.

3. Core task in a company merger: Review existing contracts

Contract management is essential in post-merger integration. The first step is to obtain a complete overview of all local and global contracts of the company to be integrated. They must also be compared with the buyer's existing range of contracts and services. On this basis, companies then receive individual recommendations:

• For which contracts does an unchanged takeover make sense?
• Which contracts need to be adapted and where? Or even completely redesign them?
• Are there any contractual relationships that should be terminated?

It is important to reach a consensus between the affected departments. The communicative intuition and neutrality of interim managers are indispensable for this.

4. Core task in a business combination: consolidating data

As a rule, the executive board or management is not involved in operational data management, but does provide the strategic and financial framework for it. Depending on the extent to which the processes in both pharmaceutical companies are already digitized, external experts may find a situation in which contracts and other important documents are filed in folders and possibly stored at a law firm. In other post-merger integrations, it can happen that both companies operate a large number of similar systems. The challenge here is to integrate the systems, consolidate the data they contain and make it centrally available. Managing both tasks requires less IT expertise and more a person who has an overview of national data protection laws and the processes for which this data is relevant - from the user's perspective. The actual data consolidation then takes place in project teams, which work through small task packages. For particularly sensitive topics, such as those relating to antitrust law, the teams should be as small as possible. This reduces the risk of company-critical information being made public.

5. Core task during a merger: using the merger as an opportunity for optimization

Due to the decades-long history of many pharmaceutical companies, interim managers often have to deal with historically grown structures and established workflows. Even if these work well for employees, they are sometimes inefficient. If external experts become involved in contracts, processes, departmental structures, team profiles and the like, there is inevitably a need for improvement. Companies therefore benefit from the attention that post-merger integration draws to processes and can optimize their structures in a targeted manner.

Why is interim management a success factor in post-merger integration?

Interim managers who support post-merger integrations as external project managers are relevant to success because they

• act as an additional personal resource. This allows the company to focus on day-to-day operations.
• bringing many years of experience to the table. They are familiar with the complexity of post-merger integration and ensure effective and efficient progress thanks to their professional expertise.
• Not only develop solutions, but also implement them operationally.
• independently of the respective company and therefore act objectively. As outsiders, they have no conflicts of interest and open up new perspectives. In addition, as neutral contact persons, they address any concerns and mediate between the parties.
• the build a bridge between the entrepreneurial goals of management and the operational integration of processes and employees, because they are familiar with both the operational and strategic challenges of post-merger integration. They also maintain target group-appropriate communication.
  

How does a smooth post-merger integration succeed?

The merger of two companies from the pharmaceutical industry is a complex challenge that needs to be well prepared, communicated and implemented. Interim managers specializing in post-merger integration provide support at all levels. At the same time, sufficient human resources need to be made available - both internally and externally. This is because the size of both companies, the complexity of the merger and the speed of integration have a significant impact on the resource requirements, which companies regularly underestimate. Those who seek external help at an early stage significantly increase their chances of success, because in addition to smooth post-merger integration, it is not only the day-to-day business that should continue unaffected. It is also important to ensure that decisions with long lead times are made in good time, for example with regard to new product launches, personnel planning or congress participation. Incertainties and knowledge gaps regarding the planning and processes of the company to be integrated can hardly be avoided when merging companies. It is important to deal with them both professionally and agilely and to develop customized solutions - for the time during the merger, but also beyond. In all of this, the security of supply of medicines to patients must be ensured - despite any relocation of production sites and supply chain-specific adjustments. With external experts, pharmaceutical companies can achieve smooth post-merger integration and trouble-free daily business.

This article first appeared in the industry special "Pharma and Medical Technology". The full publication is available for download. Download the brochure for free now and find out more about value chain management, circular economy, omnichannel marketing, data-driven work and automation in medical technology!