Post Merger Analysis of Healthcare Organizations

Post Merger Analysis of Healthcare Organizations

Introduction

A merger is the integration of two companies. It is a very significant decision and requires thorough analysis before implementation (Smeets, 2012). Mergers increase the probability of a business to get success, which is why it becomes necessary to understand how mergers take place and why. Sometimes, mergers also fail to meet the expectations because of which that integration took place. However, careful planning and integration reduces the chance of failure (PCW 2010).

There are many examples that prove the importance of mergers. One of the companies that have excelled on this strategy is Cisco. They have grown and become successful by involving innovation and expansion through acquiring small organizations that were good at technology. Through their experience, they have developed strategies to make it even more successful and effective. They have focused on the acquisition of small companies as they wanted to have an upper hand over them. They assess the business well before making an attempt to acquire it and make sure if the companies are compatible and similar in temperament (O'Reilly 1998).

Discussion

Health service industry is facing economic uncertainty and indecisive regulatory environment. Sales of medicine have fallen to a large extent. The researchers tell that a significant number of patent expirations are due by 2014. Because of this, revenues of almost half of the top pharmaceutical companies will be at risk. Companies attempt to improve their financial and operational efficiency through mergers (atkearney, 2010).

Financial Drivers Causing Mergers

Government regulations are becoming more advanced and concerned about health of people, thus focusing more on the health care sector. They have enforced price floors and ceilings for their products so that everyone can have access to the medication, and the quality control department makes sure there is no loop hole remaining. The big companies have achieved economies of scale so they can comply with the regulations of government, but for small businesses, the costs are rising up and revenues falling down.

For this sector, the credit policies are also very limited and restrictive. This causes lack of funds for small companies to operate properly and compete with big fishes of the industries. To ensure their survival, they look for mergers. With the option of merger and acquisition, companies try to strengthen their position and increase efficiency to achieve economies of scale. The big companies who have the capacity to survive also tend to merge for the same purpose of achieving low cost high production situation to increase revenues. The big giant pharmaceutical companies like Pfizer, Roche, and Merck etc. are also spending on mergers and acquisitions (atkearney, 2010).

This financial instability is not just for companies that produce drugs or pharmaceutical instruments but also on the service sector. Regulators are trying to flourish the overall healthcare marketplace. There remains a pressure on all kinds on physician practices, surgery centers and hospitals thus forcing them to look for mergers and acquisitions as a way to survive and grow (Deloitte, ...