Effectively managing the human fallout of MAs Viewpoint careers advice blog

Effectively managing the human fallout of MAs Mergers and acquisitions (MAs) and other forms of company restructuring are now a constant reality in the life sciences industry.  The impact of MA activity is felt by a growing number of workforces. Managing the fallout effectively calls for forward thinking, careful planning and sensitive communication with all stakeholders. Pfizer has recently announced that it will buy Hospira for around $17bn. Shire has just acquired NPS Pharmaceuticals in a $5.2bn bid. Novartis has earmarked the closure of manufacturing plants in Puerto Rico and plans to outsource manufacture to either Eli Lilly or Virbac. MA in life sciences is now a part of daily life These restructurings and realignments might make logical business sense, but there is also a human capital impact that underpins the company’s ultimate business success. The pharmaceutical industry is under pressure from every corner, with expiring patents on blockbuster drugs, research and development productivity on the wane and constant negative pricing pressure forcing the need to rationalise. One consequence has been a surge in Merger and Acquisition (MA) activity in an effort to cut costs and streamline operations.   Combining resources through restructuring and divesting those which are not boosting the bottom line have become key strategies in the changing climate. These restructurings and realignments might make logical business sense, but there is also a human capital impact that underpins the company’s ultimate business success. MA global activity is largely US driven although deals are happening across the world through geographical expansion. A number of big pharma will continue to drive MA activity through 2015 2016 where larger companies such as Pfizer and Teva have both the appetite and the cashflow to look at investments that support existing divisions. Interestingly larger companies are also increasingly looking at early stage development areas that can be divested. GSK is looking at a possible IPO of its HIV division where it owns almost 80% of ViiV, with Pfizer of the US and Japan’s Shionogi holding the rest, although GSK will still need to decide how much to sell and where to list. Meanwhile Circassia and Horizon were highly successful listings last year and the expectation is that there will be more to follow, although this may be more apparent in the US, where there is greater opportunity and more investor appetite. Anthony Clarke, CEO of London Business Angels comments that,“ Life sciences companies make attractive early stage investment opportunities as they have the ability to scale and generally have rich I.P portfolios meaning that they are able to carve out defensible competitive market positions. Given that large pharmaceutical and life sciences companies are continually searching for innovative MA  opportunities, the market is naturally highly acquisitive. A good example of this is LBA angel backed Sirigen Group which was purchased by U.S giant Beckton Dickinson a couple of years ago on the strength of its IP portfolio resulting in an LBA syndicate achieving a circa 3x exit on their investment under EIS.” How best to manage the human fallout Unsurprisingly, MA generates high levels of anxiety among the workforce. Unsurprisingly, MA generates high levels of anxiety among the workforce. When Pfizer bought Wyeth in 2009 it cut thousands of jobs. More recently, Pfizer has declared that within three years of closing the Hospira deal it plans to find $800m of cost savings which undoubtedly will impact human capital. The drug company doesn’t specify where the cuts will be made but, based on past performance, it’s reasonable to assume that Hospira employees may be feeling a little unsure in the coming year. All of this uncertainty underlines the need for good communication to help smooth the transition to the new business model, while addressing employees concerns about what to expect. According to the Harvard Business Review there are five critical steps to keeping companies moving forward during such turbulent times: Open up communications â€" giving employees the opportunity to voice their fears is essential Find the true influencers â€" finding the natural leaders who are passionate about the business and getting them on board can have a positive ripple effect Make the integration swift â€" putting time frames and schedules on difficult decisions, such as redundancies and cultural shifts, can minimise necessary discomfort Deliver a clear, succinct vision and celebrate success â€" creating an atmosphere of enthusiasm and responsibility and rewarding success can encourage and uplift Expect discomfort â€" building a company through a merger or acquisition is difficult, so managing expectations around this reality can help build trust. The unique challenge of clinical trials Pharmaceutical companies are unique in that their business revolves around successful outcomes of complex and often lengthy clinical trials. So what happens when a company has invested heavily in recruiting the right personnel for a particular research project, only to be told that talent must be retrenched? What happens when a company has invested heavily in recruiting the right personnel for a research project, only to be told that talent must be retrenched? Perhaps this is one of the primary reasons for the significant upward trend towards the outsourcing of research functions among large pharmaceutical companies to smaller, more independent Contract Research Organisations (CROs) For companies conducting their own clinical trials, anticipating problems in this area might include carefully assessing their intellectual property and existing trials programmes while still ‘courting’ the interested party. It then becomes quickly evident which trials can be combined or, in some cases, terminated. To summarise In an ideal world, with good strategic workforce planning, life science companies involved in MA activity can minimise the loss of their top talent and continue to deliver results. Have you had first-hand experience of a merger, acquisition or other form of company restructure? If so, we’d welcome your insights. What were the challenges and how did it pan out in the end? We’d love to learn more on this topic. Have you had first-hand experience of a merger, acquisition or other form of company restructure? If so, we’d welcome your insights. What were the challenges and how did it pan out in the end? We’d love to learn more on this topic. If you enjoyed this blog then you might also appreciate  some of the following: Life sciences recruitment: where are we headed? Trends that will change life science hires in 2016 QA with Neil Campbell, President and CEO at Helmonics Start me up: embracing the age of life science startups Big Data, big impact on life science skills demand Stay up to date with latest news from across the globe by joining our LinkedIn group,  Life Sciences Industry Insights with Hays  and follow us on Twitter  @HaysLifeScience   h3strong Share this blog: /strong/h3