I'VE BEEN a nurse executive in corporate America for more than 35 years. My role has allowed me a wide view of the trials and tribulations of mergers and acquisitions (M&A) among health care organizations. Nurse leaders can't always find practical counsel on these company strategies undertaken for growth, market share, and economies of scale, so I want to share what I've learned. I'm hoping these will help you survive (and thrive) the chaotic times ahead, as more nurse executives experience "M&As," no matter which side of the business transaction is yours.
Nurse leaders cannot look to the literature for counsel in this area; yet, the points outlined here are critical to executive survival during a merger or acquisition.
ELEVEN LEARNINGS FOR NURSE LEADERS EXPERIENCING M&A CHANGES
1. It is absolutely critical that you keep your M&A work to yourself. You are legally bound to not share information with anyone outside the M&A team. You will need to be aware that even C-level executives may not be privy to what you know. M&A is serious business, and timing is everything when it comes to informing staff, shareholders, partners, and other parties. Also, you need to realize that it can be painful to know the fate of executives when those individuals are not aware of what is about to happen. However, you cannot share this or any other information.
2. When you officially know your company is not investing in what you believe to be a good investment, you might elect to make the investment as an arm's length transaction. You will need legal counsel to understand the potential impact of federal and state laws on the process.The Securities and Exchange Commission (SEC), which regulates publicly held companies, uses another set of standards that are important to know. If you are considering a transaction with a public company, the SEC standards offer guidance in this area.
3. A merger or acquisition will change everything. While prework is going on, it is time to leverage your professional network and search, both inside and outside the company, for a different position, a newly created position, or something you would like better in a new company. The best time to negotiate for one's self is before the deal closes, not after.
4. When you are involved in a merger, you are in a more favorable position if you are employed by the organization that is buying. It is more likely that you will have a position at the end of the transaction. While there are so-called "flip-flop" M&As where a smaller company takes over a larger company and replaces the larger company's board and leadership team, these transactions are rare.
5. Debt, which is a strong motivation to engage in the strategies, can be buried in the M&A activities. Tax implications play a part of the profit and loss statements, so knowing how the financial structure of the deal is planned is key. Nothing is more important than the data surrounding how the targeted business makes money. This concept may be difficult for people to grasp, but financial numbers must work for the transaction to make sense and take place.
6. Use Guidestar or another tool that delineates IRS filings associated with for-profit and not-for-profit organizations. Pay particular attention to the annual reports produced by for-profit organizations. Key points to evaluate include: Executive compensation plansFuture sales (eg, patient volume)Geography
7. Credentials of employees. In my experience, entrepreneurship does not always align to health care's standard credentialing model. In other words, where a traditional hospital might require an MSN degree for a management position, entrepreneurs are not governed unless the law is explicit about their background for education and standards. During due diligence, you are likely to encounter a few rebels who launched a start-up after seeing a gap in the market place that needed a solution.
8. The motivations behind a merger or acquisition are as diverse as the transactions themselves. Typically, the acquirer wants to gain market share, increase revenue and profit, secure a new product line to complement existing offerings, segment the market for competition purposes, and/or achieve economies of scale. When a company's profits are down, it often becomes targeted for takeover. However, cash-rich organizations can become targets as well and often these transactions are hostile in nature. Be aware that thrill seekers in leadership positions can be attracted to the power exchange that comes with a hostile takeover bid, especially if a close competitor is the target.
9. If you are being acquired, it is likely that your organization has not been as profitable as the acquiring company. Try not to take it personally when you hear that "your company" was underperforming or lacking in some way.
10. Expect wholesale change once the papers are signed. When you are acquired, you change; the acquiring company does not. Be prepared to stay the course. Help your staff understand the changes and how this new direction impacts operations and patients.
11. Most acquisition teams want the current core leadership team to assist with the transition from the prework period until date of sale. If you would like to continue with the new organization, now is the time to negotiate what that experience will look like. Key executives already have exit clauses tied to the M&A success, and that situation usually continues for 1 year postclose. If you do not have such an arrangement, assess your value to the organization and the potential impact of your departure. If you are an executive and are not part of the M&A team, it is likely you will be bought out or terminated once the sale is complete.
There are many prognostications that American health care will soon be dominated by a fewer number of much larger health care systems. Different experts predict different numbers of "surviving" national and/or regional systems in the future, but the underlying agreement is that systems will grow through mergers, acquisitions, and other partnerships, like joint operating agreements. Nurse executives will be experiencing M&As at a higher rate than in the past. Your colleagues (including me) who have experience in this evolving reality are resources to utilize as you face this new experience. Please reach out to us, because, as always, other nurse leaders are among the best supporters for nurse leaders.