Essay Sample on Mergers & Acquisitions: Benefits, Examples & Strategies

Introduction

Mergers and acquisition activities have increased greatly in the recent past and buyers and sellers seek to create value in their finances, operations, and strategies. In the long run, mergers and acquisition lessen the cost, improves productivity and increases outcomes. Health systems get to invest in technology, shared services, ancillary services and quality improvement that is spread across a broad base after the merger and acquisition transaction is finished. Examples of successful mergers and acquisitions were presented in the proposal as seen below.

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First, a clearly defined operating model for an acquired institution constitutes a statement of a strategic vision for the combined entities. Research has shown that hospitals with clearly defined goals and strategies are more likely to achieve cost and quality outcomes. This is done through the integration, planning, and execution with the strategies such as explicit financial and nonfinancial goals, accountability in leadership from vice presidents level, identifying the cultural differences between the organizations. Also, it is important to align clinical and functional leadership earlier in the process as well as implementing project management projects with a targeted timeline so as to be reviewed every 2 years.

The second strategy involves planning to realize revenue growth and cost reduction opportunities. The hospital leadership should look at potential value drivers and bring to consider whether to collapse service lines, relocate or integrate and add assets. Leaders should look beyond the increasing sales and determine what the acquisition will add to the organization that it cannot do alone. However, the leadership should beware of factors that may limit value creation in the future (HFMA, 2017).

Understanding key enablers will be an important strategy. During the early stages, due diligence should be undertaken in the integration of two organizations communication and culture count. Thus communication should focus on integration efforts and building a common culture between the organizations. To overcome cultural barriers the leaders from the acquiring entity should consistently and frequently articulate the mission and the goals of the transaction. Having an integration plan that aligns itself with the transactions strategic rationale acts as enabler since it will gain both the cost and the quality of the transaction (HFMA, 2017).

Areas identified for value from the transaction include bringing integration team early in the process for them to build relationships with their counterparts. This helps in identifying potential issues that could hinder the integration efforts and therefore adjust the projects plan accordingly. Also the need to deploy best practice project management technique the integration team should put forth tasks that seek to create value for the transaction in front. There should be metrics and milestones to measure progress on activities and on completion an allocation from the executive for someone who will be solely responsible.

Communication is equally important before, during and after a merger or an acquisition. Regardless of the outcomes of the transaction, there is a need for effective and efficient communication which occurs when it is on a scheduled basis and in an organized manner. When drafting a communication strategy it is important to analyze some of the obvious questions that a proposed merger or acquisition may generate among the different stakeholders and generate common answers from them. It would also be beneficial for the managers to cascade down messages that are related to the transaction and facilitate the team members in further pushing down the message (HFMA, 2017).

Furthermore, the importance of culture cannot be overlooked as well and there is no easy way of addressing cultural differences other than removing the potential roadblocks. Common culture should support the goals of the broad set of stakeholders. Investing time during the early stages of a merger is essential so as to achieve a successful transaction. The issue of cultural differences should be addressed thus as failure to understand unique cultures of the different organizations could make it difficult to meet strategic goals. A culture compatibility test should, therefore, be included during the early stages of the merger so as to define expectations and identify potential problems (Hospital M&A: When done well, M&A can achieve valuable outcomes, 2017).

Several strategies can be adopted in merging and acquisitions as discussed in the proposal. Some of these include incorporating a strategic vision for the combined entity, identifying and validating areas for value capture, strategizing to realize revenue growth and cost reducing opportunities as well as understanding of one key enabler, and the transaction tend to be of high value than their counterparts on non-high value transaction who do not work on a proposed strategy. Also in cases where effective and efficient communication is not employed the results are negative since during a merger or acquisition the organization works towards achieving a common goal and therefore if the common messages are not cascaded down and pushed down through the organization, one may miss the point altogether. Both parties need to understand important cultures of the different organizations may limit them from achieving the estimated value. In cases of a common culture, it should be addressed because if not the organizations would be working at loggerheads and will not achieve the strategic goal and meeting the transactional cost of a combined organization may be difficult if the cultures are different.

Reference

HFMA. (2017). Deloitte Hospital M&A Research Findings.

Hospital M&A: When done well, M&A can achieve valuable outcomes. (2017). Retrieved from https://www2.deloitte.com/content/dam/Deloitte/us/Documents/life-sciences-health-care/us-lshc-hospital-mergers-and-acquisitions.pdf

HFMA. (2017). Health care 2020; A series of reports examining how to prepare for major healthcare market trends over the coming year.