Making a Merger Work

An article posted in the Medical Device Business on February 2, 2016, entitled Making a Merger Work, speaks specifically to mergers in the medical device and diagnostics industry, but the wisdom shared can be applied to all businesses. The article asks and answers a primary question: M&A transactions are proving to be popular in 2016, but what one factor might set the successful mergers apart from those that never quite gel?

Answer: Industry professionals say company culture is worth focusing on acquisitions because it is integral to how the combined company works after the deal closes.

The authors of the KPMG report wrote that 67% of survey respondents find "strategic fit" the most important factor in determining whether an acquisition target should be pursued. "Growth potential" was ranked highly by 56% while "investment return" got a vote from 44% of respondents. "Cultural compatibility," however, only garnered importance from 15% of respondents. At the same time, 54% of respondents said "cultural and HR issues are the most consistently challenging integration issues," the authors wrote.

In an interview in December, Frank Pokrop, director of quality and regulatory affairs at CareFusion and a member of MD+DI's editorial advisory board, discussed the combination of company cultures. He said:

"Culture is both qualitative and quantitative. You have the touchy-feely type things in terms of how you interact with individual employees, how executives treat their workers, the type of communication, the frequency of communication, and the ability to handle unscripted Q&A... Other measures of culture include the goal system, the rewards system, how we recognize individuals, employees, and teams. These are things that really bring together possibly two very different companies."

We at EPOCH Pi feel that understanding, supporting, and building cultures that can be combined is an important element to M&A success regardless of the industry and we are excited to see that the topic continues to be in the press and more companies are allocating resources to it.