Why a post-merger integration plan is the make-or-break feature of successful M&A in eHealth

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The eHealth industry is growing. Growth often means regular flux, with one-time leaders of industry losing their market share and others gaining it just as quickly. Mergers and acquisitions are an essential and inevitable part of navigating a volatile market. Growing, reconfiguring, and reimagining an organisation is crucial to gaining a competitive advantage, but meanwhile, the transition can be just as volatile as the market; this is why a post-merger integration plan is crucial. 

The key stakeholders involved in most mergers are looking for continuity and minimal disruption. Having a robust plan in place to refer to during the process means a greater likelihood of achieving that continuity. Nowhere is this more true than in the world of eHealth, where due to the pandemic among other factors, mergers have become a key feature of the market.

M&A analysts are instrumental in putting together a meticulous post-merger integration plan. Their work touches on communication and change management, cultural and employee integration, legal compliance and finally, performance measurement. Freelance analysts in particular are good at taking an objective view of the deal and finding ways to ensure its success for all stakeholders. 

The fitness of the eHealth industry

When feeling a little under the weather, the first thing we tend to do these days is google symptoms. Most people will tell you that misunderstanding the results has led them down a rabbit hole of the worst possible outcome. Meanwhile, eHealth products come as a curing balm that allows us to connect in real-time with health professionals who can offer qualified suggestions without jumping to drastic conclusions. 

Moreover, chronic complaints such as diabetes and hypertension have heightened the demand for around-the-clock access to medical attention. The pandemic further accelerated this trend as patients needed to be able to monitor the progress of their condition in real-time. With the potential of the disease largely unknown in the early stages, and with patients unable to leave the house, eHealth solutions filled a natural gap by allowing healthcare providers to connect with patients remotely. 

The eHealth market can refer to a wide range of products and services in a huge, multinational industry. The common understanding of eHealth is online services (called telemedicine) that patients can use to get quick access to clear and reliable information about symptoms and connect with doctors. However, it has a far more broad-ranging definition; it also refers to the technology behind healthcare within hospitals, much of which is interconnected and interrelational. It encompasses everything from the robotics that surgeons use in theatre to the secure management of medical records and for research and testing purposes. 

The eHealth industry has grown exponentially over recent years, particularly since the pandemic. In 2022, its value came to represent upwards of $243 billion worldwide and is forecasted to show growth of 17% going into the year 2030. This growth isn’t only expected in the Global North. It is also being promoted by the UN as a measure to increase access to reliable and affordable healthcare in developing countries. 

How have mergers and acquisitions changed the eHealth landscape? 

Since the pandemic, investment in eHealth has grown significantly, which unsurprisingly, has led to many changes. In 2020, the industry saw an increase of 17% in worldwide M&A deals. One of the largest was the US medical firm Teladoc, owner of the mental health platform BetterHelp. While it was the largest takeover of that year, it came to represent huge, historic losses for the healthcare giant. 

In comparison with the busy pandemic years, 2023 has seen a slowdown in M&A apart from two major multi-billion dollar deals right at the end. These new deals mean renewed confidence in the industry and greater investment intention. All industry eyes will be on the success of these takeovers, waiting to see if they are successful at bringing costs down for customers. It also means that the time is ripe for other companies looking at merging to develop a proper post-merger integration plan to further guarantee success. 

As is clear, proper advice is key to navigating the murky waters of a merger. As the Teladoc case demonstrates, the market might not automatically spell success. A well-conceived post-merger integration plan is key to ensuring positive outcomes. This is where an M&A analyst will play a vital role.

What does an M&A analyst do? 

Briefly, an M&A analyst’s role will cover almost every aspect of the merger to ensure it runs smoothly and yields positive results. If they are present from inception to completion, some of the things they will lead include: 

• financial analysis 
• due diligence 
• valuation of the target company 
• market research
• deal structuring 
• communication 
• regulatory compliance

However, they don’t do all this alone. To make informed decisions, a good M&A analyst will always work closely with other professionals like investment experts, legal advisors, managers and other senior executives. 

Another major aspect of an M&A analyst’s task is to formulate a post-merger integration plan. This plan will aim to ensure that any changes post-merger are in line with the continuity aims laid out at the beginning. A post-merger integration plan works to avoid failure and seeks to extract maximum value for all stakeholders. 

Which type of merger is the hardest to implement?  

There are four major types of mergers, each with its own distinct characteristics depending on the aim of the merger and the type of businesses that will be merged. 

One of the most common merger structures is the horizontal merger. A horizontal merger exists to eliminate competition and take a greater slice of the pie. It will traditionally be done with two companies that have a similar project and market share and are often in direct competition with each other. Companies are also often merged in this way to fill a gap in one’s product line. For example, a large tech firm might buy up a smaller startup to eliminate the competition and offer more for their customers (see Facebook’s takeover of Instagram). 

Another very common type of merger is a vertical merger. This type typically exists for a company to augment its product by acquiring the means to produce its own parts. It is not necessarily about swallowing the competition, but about buying up associated products on the supply chain. One example could be a diamond mine buying up a jewellery chain, giving it the advantage of owning all parts of the process and thus the product. It means a company can have greater control over supply prices and bring down production costs. 

Our third type is a concentric merger. Similarly to a vertical merger, a company will buy up a company that is not necessarily in direct competition, but that can complement their own operations. The aim is to improve efficiency, bring down costs, capitalise on shared markets and achieve synergy. An example of this could be a successful coffee chain buying the company that produces the baked goods it would have otherwise bought. Instead of buying the baked goods at wholesale prices, it can own the entire production and make more profit. It differs from the vertical merger because the former aims to bring parts of a product together. The latter works to sell two separate products concurrently.

That brings us to our fourth and hardest-to-implement variety of merger. This type is the conglomerate merger which, as the name suggests, is the merging of two conglomerates often with completely opposing or unrelated products. One good example is the $13.4 billion acquisition of Whole Foods by Amazon. Whole Foods was not an ailing business at the time, but it suited Amazon to have another string to its bow after seeing a trend towards the desire for on-demand groceries. It also had the benefit of putting Amazon into the physical space, cementing its position in the traditional shop front business. In doing so, they were also able to tackle their largest competitor, Walmart. 

However, this kind of merger is tricky because of the size and risk involved. Often, each company is well-established and has its own specific market shares. Furthermore, the larger company may not know anything about the smaller company’s business. It can lead to confusing strategy decisions and a lack of direction and purpose. 

Ultimately, no matter the nature of a merger, a post-merger integration plan is paramount. This is particularly the case for a market in as much flux as eHealth. But what should such a plan contain? Is there a template for situations so unique and predisposed to change?

How do you integrate two companies after a merger? 

An improperly planned integration has the potential to bring down the whole operation. Freelance M&A analysts come with the benefit of an objective view and varied experience. As a result, they can cleanly and clearly recommend where changes should be made.

A PMI plan can vary substantially based on the focus of the merger. There may be particular pain points that need to be addressed with more urgency than others. For example, if the merger has brought together organisations with very different cultures, it would be wise to focus more heavily on how to ensure that these two companies are able to work together. 

A smart way to do this would be to place an emphasis on the importance of the structure of the newly merged organisation. This ensures clarity on who reports to whom and who is responsible for what. This is also a good time to work with HR managers to agree upon employment policies. 

In contrast, if the two merged companies have a similar cultural background, it would not be wise to spend too much time on ensuring continuity there. This is particularly true with young companies that are already up to speed on the latest collaboration and communication tools. 

These are general comments regarding hypothetical scenarios. While mergers are always diverse in character, there are some elements common to every M&A transaction that should always be included:

1. Integration objectives and strategy. Objectives should be clearly laid out from the beginning, outlining how the combined businesses will create value and achieve synergy. 

2. Governance structure. Outline a governance structure to ensure clarity. There are likely to be several people who had the same level of seniority when the organisations were separate. Being clear about the organisational structure reduces the possibility of friction and facilitates operational flow.

3. Establishment of integration teams. Key figures within the organisation should be tasked with focusing on a particular element of the integration for their different functional areas. For example, IT expertise, finance, operations, and HR departments should build integration in their own specialised ways, rather than having one head focus on the whole picture.

4. Communication plan. Teams need to understand how they will communicate and collaborate. The post-merger integration plan should include guidelines on what comms tools to use and proper conduct. Ensure that information is available at all times for everyone involved.

5. Cultural integration. Assess and implement policies based on how they affect interactions between colleagues from different organisations. How do these changes affect corporate culture and how can a unified and positive work environment be fostered?

6. Technological and operational integration. Analyse tech shortfalls and surpluses and where integration between different working practices can be made. Prove how the merger can prioritise process optimisation and produce efficiency gains. 

7. Legal and financial integration. Address legal issues with integration. Are there conflicts between contracts and licensing or can they be consolidated? Financial systems and processes should be combined for simplicity and compliance. 

8. Establish KPIs. Define a system for regular check-ins with key stakeholders while determining how performance is measured. 

With these elements in place, you have the basic building blocks of a post-merger integration plan. This action plan can go some way towards improving the outcomes of what can be a rocky time for businesses. However, the structure of the plan is not everything. In a merger, the timing of the project and its individual assets is paramount to success. 

Case study: Overcoming resistance to deliver PMI success in eHealth

“Even in the most challenging post-merger integration projects, strategic leadership, clear communication, and a strong team can help steer the ship to success.”

– Mark Storry,
Strategy Consultant

Having outlined these different types of mergers and the features of a robust plan, let’s refocus on eHealth. Mark Storry is a freelance M&A analyst with a wide range of experience with firms of varying sizes. He would regularly take projects from their inception to seeing them through to the end, managing the post-merger integration. Due to his expertise, Mark was brought in to manage the merger of an eHealth project in the Middle East.

His most important task was to manage the integration of the two companies while maximising initial profits and ensuring they were sustainable in the long term. It was a challenging situation that saw him tackling stakeholders with opposing views, large cultural differences and rapid rates of change in staffing. Despite these obstacles, he led the project to success.

To do so, he closely collaborated with the management teams of each company involved to build a comprehensive post-merger integration plan with a focus on addressing key areas. Product offerings, customer service, sales and technology infrastructure were all critical domains for each business and therefore required particularly close attention.

The method

One initial challenge was stakeholders from different departments and companies with contrary ideas and mistrust of each other. Furthermore, the management teams were reluctant to change, especially when directed by an outsider. Thankfully, Mark was able to foster a culture of open communication, despite initial reticence that led to trust in each other and collaborative working. Mark built a united team from the ground up that was made up of members from both companies with the shared goal of the merged company’s success. 

The whole project required a massive investment of time and resources, but nowhere more so than the integration of the two companies’ technology infrastructure. Further effort needed to be put into developing a unified sales process, ensuring maximum value for money for customers and shareholders. Thankfully, Mark brought the required flexibility and innovation.

Summary of approach

• Worked closely with management teams to build a strong post-merger integration plan.
• Fostered more open communication and developed a culture of collaboration.
• Integrated complicated and expensive technology infrastructure.
• Developed a unified sales process.

The results

After having worked through initial challenges, Mark led the team to deliver a successful post-merger integration project. By initiating a strong and cohesive plan at the beginning, they were able to see the project through to successfully integrating two eHealth companies and bringing about increased revenue and customer satisfaction. The two companies became one after having proven the maximum value of the acquisition. 

Mergers and acquisitions require a clear head

The process of a merger is a difficult time for the companies involved. There are as many moving parts as there are opinions on how it should be done. Past successes shouldn’t necessarily be copied as each case is different. The intended outcomes, aims and market focus all play a part to share. This isn’t to mention the often enormous obstacles that cultural differences present.

Building a plan for the end of the deal from the outset helps companies avoid these potential pitfalls and keep the merger on track for success. Finding a freelance M&A analyst with Outvise takes the legwork out of making a plan, and frees management up to focus on the bigger picture. As the eHealth industry continues to evolve, this expertise will be essential for companies looking to sustain success.