Communication is the most important success factor for effective M&A

Once the merger is announced, during the transition phase, both companies may find that cultural differences impact the working relationships between employees


Ankush Gupta, Chief Human Resource Officer-Sterling Addlife Pvt Ltd.

Shortage of beds and demand supply gap in healthcare delivery is resulting into substantial growth opportunities for healthcare companies. Private Equity Funds, Capital Markets and Strategic investors are fuelling growth at one end and on the other side companies are seeking economies of scales, standardisation of process, access to new geographical markets and leveraging competencies available within themselves. Increasing cost of healthcare delivery, ever raising salaries, regulations by third party payers, quality imperatives by accreditation bodies and better-informed patients are resulting in pressures on margins and healthcare industry is heading towards consolidation and growth through Mergers and Acquisition.

Merger and acquisitions help companies to strengthen competitive advantage, enhance ability to manage uncertainty and solve complex problems. However mergers and acquisitions lead to restructuring and re-organisation, therefore it is a fore gone conclusion that M& A activities cannot be successful without taking into consideration people's issues.

In pre- merger phase, employees of both the companies will have apprehensions about their employment, job security, and cultural differences between the companies, job responsibilities and accountabilities. Researchers all over the world have found that M& A activities affect psychology of employees associated with company to be acquired. Psychologically these employees will have feeling of fear, dis-orientation, anger, frustration and confusion.

As a result of stress there will be a decrease in sense of belongings to company, lower engagement, increase in employee attrition rates, reduction in productivity, increase in union activities leading to industrial turbulence. Psychological state of these employees can lead to lower service levels, increase in patient complaints and loss of competitive position. The effect of these issues will be also on the financial health of company as well as there will be an increase in hiring cost, training cost and cost of motivating employees.

Once the merger is announced, during the transition phase, both companies may find that cultural differences impact the working relationships between employees. Merged entity may face hostile behavior from acquired employees and there can be tendency for power struggle, blame game, escape goat phenomenon and ego clash. The merged entity will face resistance to change and may have to work hard to win the loyalty of these employees to merged entity. During the transition phase, the merged entity may actually identify redundancy in system and may find a need for rationalisation of manpower either because of economies of scale due to presence in similar geography with similar service offerings or due to implementation of technological solution to reduce perennial manpower cost. Maintaining confidentiality of exercise may become challenge due to gossip and grapevine in the company.

Previous 1 3 Next

Leave a Reply Sign in

Notify me of follow-up comments via e-mail address

Post Comment

Survey Box

National Health Policy

Is National Health Policy 2017 helpful for patients?

Send this article by email