Prioritizing People During a Carve-Out Transaction

There is no doubt that carve-out transactions are incredibly complex, particularly when it comes to separating operations and systems. While these are the “brass tacks” on the forefront of all transactions, there is another critical factor that can doom a deal if it is neglected: the people.

Culture is a powerful term in business—a concept often credited with having a significant impact on performance and potential, but it also is one that gives many executives pause. Unlike a system, process or product, it’s a soft concept that isn’t so easy to grasp, and as a result is often ignored. Stressing the importance of culture prior to the actual carve-out is vital to the success and survival of the new company. This is especially important in the health care, pharmaceutical and medical device space, where companies can have widely different attitudes toward research and development, as well as quality and compliance

4 Benefits of a Strong Culture

1. Culture is the DNA of an organization. It provides employees with a clear perspective on how people work in the organization and how they interact with their customers.

2. Empowered employees promote the ideals and mission of the entire company.

3. A strong culture promotes clear communication. Information flows both upward and downward throughout the organization.

4. A strong culture also encourages consistent approaches to important operating principals.

4 Detriments of a Weak/Toxic Culture

1. Water-cooler conversations tend to be of the classic “us versus them” variety, or “we would never do that.”

2. Coworkers are labeled “PMA” (pre-merger Company A) or “PMB” (pre-merger Company B). Initiatives must drive a common identity and culture that break down the past affiliations.

3. There is a lack of open collaboration and information sharing. Often employees work alone and hoard information to prevent team dynamics.

4. Divergent attitudes to the U.S. Food and Drug Administration and regulatory compliance may surface. For example, Company A may do the maximum to comply, no matter the cost. Company B may do the minimum to stay out of trouble because it’s the most cost efficient.

Evaluating Culture and Building for the Future