Five steps for managing aged care mergers

Bruce Nixon, our CEO, shares his insights into successful mergers. 

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Over the past decade we’ve seen increasing consolidation within the aged care sector due to an overly fragmented market and growing demand. As demand and industry competition continue to grow so too will the trend of mergers and acquisitions in the sector.

While consolidation is inevitable, it will bring significant operational challenges. The merging of two separate organisations can be onerous and affects every part of the business, including IT systems, processes, employee roles, customer service, risk and governance.

In a sector where the focus is on providing quality care for vulnerable customers, having anything affect operations can be risky. If the two organisations merging have completely different ways of working, back end systems and processes, disruption to output is likely.

For instance, differing standard operating procedures and processes can leave staff confused about how they should work within the newly merged entity. Also, switching over to new IT systems can cause issues in back end support areas, like finance and administration, as well as critical areas like patient care. 

From an operational perspective, these are the five things aged care providers should be considering when planning for a merger.

1. Review the situation

It’s important to fully understand the scope of the merger, understanding what you’re starting from (the present state) and the requirements involved in where you need to go.

Capturing the operating model will facilitate this process and give some clarity to which parts of the business will need to change what the likely impacts will be. The model should include the value streams, capabilities, processes, procedures, use of systems and compliance obligations to help ensure nothing is overlooked when the two organisations merge.

2. Assess the difficulty

Costs and risks need to be thoroughly considered. Use your model to assess what capabilities will be required, what roles and systems will be needed by the new entity, what processes and procedures will be relevant, how will compliance obligations be met and how will value be created in the new organisation.

3. Simulate the transformation

The model of the current operation can be used to identify processes to be combined, those that need to be removed, organisation structures required, people impacted and systems required. The capacity planning, based on known volumes of work, staff numbers and systems capability will be contained in the business models.

Simulating the merger will remove much of the risk associated with the transformation and will allow you to determine an effective future operating model.

4. From Strategy to execution

Once simulated, you can start to implement the transformation using the new business and operating models to guide the process. The model will also provide guidance on requirements such as training and realignment of responsibilities and how this will affect employees and their roles. Standard operating procedures (SOPs) will also be easier to develop using the model.

The majority of the risk and cost of a merger lies in the implementation phase, however, if you do your due diligence, use a modelling approach and undergo simulation you can have a high degree of confidence in a successful outcome.

 5. Lock in the benefits

Many change initiatives fail to retain improvements. The operating model that has been captured in earlier steps becomes a Business Management System that guides the effective operations of the business. This system becomes a reliable source of truth to consider further changes and additional mergers and acquisitions, reducing the effort required for steps 1-4 on the next, inevitable, transformation initiative.

Mergers and acquisitions are difficult and do not have a good track record. The steps outlined above will improve the likelihood of success, create a better operating environment and position the organisation for future change.