If you think the rate of marriage failure is high, consider the fate of business marriages. Depending on whom you ask and whose data is available for analysis, 70 to 90 percent of all business combinations fail to increase owner value.
But that doesn’t mean that you shouldn’t try. What if all of those failures resulted from stupid mistakes?
Many medical groups and other entities in the healthcare industry are considering merger of some sort, whether structured as a true merger in the legal sense or as an acquisition or other combination, as a strategy for their future.
In weighing their alternatives, they tend to look at the hard numbers to gauge the chances of success. Things like increased market share, greater economies of scale, and the amount of the purchase price.
But the so-called soft factors, most importantly the cultural aspects, are essential factors in the ability of the merger to actually succeed several years down the line. This is especially true in connection with medical group mergers, where individuals, not equipment, are the units of production.
You pocket the purchase price or celebrate the true merger of their practice into yours – glasses are clinked and smiles abound. Yet you or your colleagues now have to work with “those people” for the next three or thirteen or thirty years.
What if your group values openness and they value secrecy? What if your group empowers individual action and they value following policy? What if your group incentivizes productivity and they value fixed salaries?
Bigger is sometimes better, but not always. It’s the right bigger that is better.
Comment or contact me if you’d like to discuss this post.
Mark F. Weiss