4 Ways to Prioritize Employee Communication During Pharma M&A

Over the last few years, rarely a week has passed without a new pharmaceutical M&A headline breaking into the news. From global megadeals to integration rumors and the occasional corporate love triangle (e.g., Mylan’s recent bid for Irish drug manufacturer Perrigo, a tactic to dodge its own takeover by Teva Pharmaceuticals), this sector has long been in a state of rapid change. The public buzz surrounding these deals often touches on issues such as corporate taxes, product pipeline and R&D spending, but the impact on employees is rarely mentioned.

Through March 2015, global biotech and pharmaceutical mergers and acquisitions activity reached nearly $60 billion, a 94% increase from the same time in 2014, according to Reuters. Given the volume and value of these transactions, organizations cannot afford to make internal employee communication an afterthought during the M&A process. Unfortunately, many are missing the mark.

A Costly Failure To Communicate

To the benefit of no one, most senior leaders take an exclusively financial and operational approach to M&A discussions and integration planning. Revenues, manufacturing consolidation and service lines are critical to any deal, but more importantly are the soft factors such as corporate culture and human capital. Failing to address any of these variables during a merger or acquisition will inevitably detract from the transaction’s results. You cannot deliver on what you promised if you don’t have the key resources to do the work!

Seventy-six percent of executives feel that communicating change to employees is one of the most common challenges during the M&A process, according to a recent study of senior M&A practitioners at mid-market organizations conducted by West Monroe Partners and Mergermarket. More than half of respondents feel that better internal communication would lead to greater deal success.

Larger corporations may have an easier time absorbing the growing pains of a poorly communicated integration (and the retention issues that come with it), but middle market and smaller firms can’t take that risk. No matter how well two organizations’ balance sheets, IT infrastructure and supply chains align, an effective merger or acquisition still depends on their people. An ineffective internal communication strategy at any point during this volatile period will impact the combined firm sooner rather than later.

Getting The M&A Message Across

Internal M&A communication isn’t a task that should be managed on an ad hoc basis, or informally wedged into the HR department’s responsibilities. Organizations need to develop a comprehensive program that treats employee communication as an essential component of this significant change. Pharmaceutical M&A leaders can take multiple steps to maintain clear, meaningful dialogue with their employees.

1. Practice strong communication from the start: Informing employees about an impending merger or acquisition isn’t one isolated step of the transaction process—it’s an ongoing exercise that leaders need to practice from the first deal planning meetings. Clearly, employees will not be informed when it is pre-deal announcement, but you need to have a plan in case something leaks during the process. Communication plans need to cover from early deal negotiations to announcement to Day 1 through post-closing.

The better senior stakeholders from both organizations communicate during pre-combination days, the more likely they are to reduce employee questions and potential productivity impact. It’s also important to determine—early on—the appropriate timing, channels and messaging you’ll use to make employees aware of changes or address questions.

2. Bring in third-party expertise: Corporate leaders in charge of a merger or acquisition tend to have plenty of financial and operational expertise, but communication expertise may be less common. External communication and change management advisers fill in these gaps and bring a useful degree of objectivity to harmonizing both organizations’ messaging. Experts understand that no one-size-fits-all M&A communication template exists. Instead they can help merging entities develop targeted communication strategies for handling different scenarios and for interacting with specific personnel.

3. Address multiple levels of communication: Communication spans all layers within an organization—there are no boundaries. Executive leaders need to convey information about what this deal will mean from a high-level corporate perspective, the ramifications for different teams and departments, as well and most importantly, the degree of impact on individual jobs and daily responsibilities. Employees need to understand what this transaction means for them before they will continue to execute their day job. Although the exact details will vary across each level, the tone and overall messaging should be consistent to avoid confusion.

4. Stay honest; stay transparent: In the pharmaceutical sector especially, an abundance of regulatory and compliance red tape prevents executives from revealing every detail of a looming merger or acquisition at one time. Despite these barriers, company leaders should still strive to be upfront with employees. Recognizing that the deal marks a period of significant transformation for the firm and emphasizing the human element of this change (rather than the financial) will help preserve morale and keep gossip from spreading.

The ultimate goal for any merger or acquisition is to create a profitable, thriving organization. The onus falls on corporate leaders to promote internal communication strategies that support, rather than undermine, positive M&A outcomes.