Briefing Note 70
In the private sector big companies take mergers and acquisitions very seriously, bringing in specialists to look at every aspect of the process. Clearly DOFs in NHS Trusts and FTs don’t have the same resources to call upon, but there are some rules of thumb that it’s worth bearing in mind if you’re considering joining up with another NHS organisation.
1). Why are you doing it?
We all know examples of NHS bodies that merged simply because they could, resulting in a destabilized and demoralized workforce going forwards. Trust boards need to identify why they want to merge – what is going to make the whole more than the parts? Establishing baselines is also important – where will you draw the line in terms of risks and costs?
2). What due diligence will you do?
In the private sector due diligence focuses on financial results, future prospects and competition. For NHS organisations there are probably seven main areas to consider – financial results, commissioner contracts, assets (both physical and intellectual), PFIs, borrowing, on-going issues and key staff.
3). Are you asking enough questions?
Don’t take information at face value. You need to dig into issues and examine them properly to get a real picture of the other organization. In practice this will often mean getting on site and actually speaking with their team. Don’t be afraid to go down the organizational structure if the detailed answer you require resides at a lower level.
4). Too much information?
You will receive a torrent of information as you attempt a merger, but where should your focus lie? Use your questioning in point 3 above to guide you. If the other side is unable to answer your questions satisfactorily you’ve got to consider walking away or else wringing more concessions out of the DH.
5). Think of a number
Sometimes the urge to actually get the merger done means the financial figures can get lost. Make sure you focus in on income, expenditure and working capital in your target organisation. As DOF you’ve got to immediately bring any issues to the attention of both the execs and the non execs.
Stakeholder relationships can make or break the chances of a merger succeeding. In particular you should investigate the target organisation’s commissioners. What proportion of income is non-recurring? Are there services currently being provided that commissioners want to move to another provider? On a more positive note is there activity that commissioners are looking to re-patriate into the target organization? In a wider context, are there any political considerations you need to take into account?
7). Are there any showstoppers?
Identify any major issues quickly. Is there anything that’s going to prevent the merger going ahead? For example, Bournemouth and Poole’s merger was halted due to intervention by an external regulator. Could this happen to you? Seeking external help with this may be cost effective in the long run. Your employees will not have the same exposure to or experience of issues and may not spot the potential showstoppers that external advisors see regularly.
8). Getting it together
In the private sector it’s reckoned that fifty percent of all mergers/acquisitions fall short of increasing shareholder value. In order to tackle this it’s best to identify integration issues early on, as you’re conducting your due diligence. Have you established a post merger plan? In particular have you made the hard decisions that need to be made about organisational structure? This should be done as soon as possible in order to keep disruption to a minimum and also to re-establish business as usual.