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Navigating M&A in Industries Undergoing Disruption

Home » Insights » Navigating M&A in Industries Undergoing Disruption

Navigating M&A in Industries Undergoing Disruption

by Khadija Tahir

M&A deals are disruption the life science industry – and that’s good, mostly. Yet, when a company reshapes its facilities footprint in the wake of consolidation, cost efficiency can be undermined by the dreaded ‘disruption dip’ in productivity. Here’s how to keep your workplaces and laboratories on track.

Are mergers, acquisitions, and divestitures testing your organizational mettle? Consolidation and restructuring are occurring at a record pace as life sciences companies rebuild their product pipelines. Improve efficiency and seek new markets.

Given that real estate and facilities represent a top expense for most life sciences companies and are a fundamental part of operations, facilities consolidations, and relocations are a common part of these strategies.

Global workplace game-changers

Rising rents for laboratory space are also prompting facility changes. These trends have led to the reshaping of corporate real estate footprints as facilities are. Consolidated, or relocated during retrenchment and geographic shifts, mergers, acquisitions, and divestitures.

At the same time, the need to compete with generics producers is driving branded pharmaceutical producers to invest in not only talent and technology but also facilities that enable innovation. Some major companies are adopting new workplace strategies to reduce occupancy costs while creating inspiring collaboration environments. These two dynamics can dovetail nicely: when a company needs to change how it operates, better workspaces and workplace technology make the change a more positive experience for employees.

M&A has become a major driver of sometimes long-overdue change in the biopharmaceutical industry’s global footprint. As major companies continue to consolidate. In tandem with acquiring small biotech concerns with promising innovations, some are renovating their older facilities, or relocating altogether.

These strategies help to attract and retain Millennial workers drawn to non-traditional open workplaces and live-work-play urban environments. JLL’s report highlights the example of Biogen, which is appealing to Millennial workers by adopting open floorplans in some facilities and including amenities such as an onsite daycare and fitness center to promote employee health, well-being, and productivity.

And it is not just offices that are getting a makeover. Some life sciences companies are modifying their laboratories as well. Providing more workspace options for teamwork and collaboration and greater access to natural light and other productivity boosters.

An industry burned out on the change

For life sciences professionals, major organizational change is the new normal, but that does not make it any easier. Some life sciences organizations are undoubtedly experiencing ‘change fatigue’, as McKinsey puts it. In a recent thought-provoking report, McKinsey Organisational Health Index (OHI) results from the firm’s survey of nearly 20,000 pharmaceutical employees between 2006 and 2013 with responses from workers in other industries. McKinsey’s analysis revealed that the surveyed pharmaceutical companies’ OHI began to deteriorate after 2011, and by 2013 had fallen below the average of other global industries in most categories.

McKinsey’s conclusion? Many pharmaceutical workers could benefit from clearer, more direct guidance through organizational change. Another core finding was that companies might be placing too much emphasis on near-term business or financial goals and not enough on employee engagement through change management – the ‘people’ part of the change.

Don’t downplay the disruption dip

Whether major or relatively minor, workplace change initiatives are simply challenging in any industry. JLL research shows that just 34% of change initiatives succeed in achieving the goals, on average, while 15% fail outright and 51%. Half of the ones that fail do so because of employee behaviors and attitudes.

For employees, changes in business strategy bring radical uncertainty about their individual roles: do I still have a job? How will my job change? Where will I work? How will my bonus be affected? Who will be my manager? Will my commute be longer? Whether it means having a different workplace or a different boss. Change means anxiety for the average person, and anxiety is both distracting and unproductive.

Lacking a strategic change management plan, many companies convey important operational change directives in pre-packaged, one-size-fits-all communications that do not address the questions and concerns of specific employees and teams. The subsequent information void creates fear, confusion, and chaos, leading to the disruption dip – the loss of productivity by diminished employee morale during major company transitions.

Chalk it up to human nature. Whether a new business strategy involves one facility change or many, a group of employees will and about the prospect. If senior management is not proactively addressing the uncertainty in terms relevant to every person. Valuable time – and valuable talent were lost as well, choosing to leave the company rather than wait for the smoke to clear.

When employees do not understand their role or feel in the change process. Their resistance means they cannot achieve their goals. It is that simple. Whether it emerges in the lab or in the C-suite, resistance to change is a natural tendency, even when the need for change is undeniable.

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