Merger Made in Heaven
At the newly renamed Millennium Pharmaceuticals: The Takeda Oncology Company, they like to joke: “Can you imagine what our business cards look like?” The new name seems to be the biggest change at Millennium, which was acquired by Takeda Pharmaceutical Co. last April in something of a fairy tale merger. “The first thing employees typically worry about in a merger situation is ‘Am I going to have a job?,'” says Millennium SVP, HR Stephen Gansler. “Takeda took that off the table very convincingly by offering every employee in the company a retention bonus to stay. You can say the words, but their actions were very much aligned with their stated objective, which was to not focus on synergies but rather on retaining people and growing the business.”
The acquisition grew out of meetings between the Japanese giant, which is looking to expand its US presence of late, and Millennium CEO Deborah Dunsire last summer. Takeda took an interest in Millennium's oncology portfolio—and, somewhat rarer, in its expertise.
“The name reflects the fact that we now have responsibility for the development of the oncology strategy and products on a worldwide basis,” says Gansler. “They have a stated objective of being one of the top three oncology companies by 2020, and see Millennium as the platform to achieve that vision.”
To get there, Takeda did a strange thing. It bought Millennium, gave it broad responsibility for a vital part of its long-term growth strategy and… left it alone.
“It makes sense to keep them separate,” says Jean-Jacques Raoult, a principal at ZS Associates, “because you have different ways of thinking about how to promote the products, different profiles of reps, and if you impose a big pharma model on that, you're going to kill it. It's the goose with the golden egg.”
Raoult is a principal at ZS Associates, a management consulting firm whose M&A practice helps pharmas merge sales forces following acquisitions. He sees a trend toward this approach, particularly in the US, as Big Pharmas seek salvation in buying biotechs.
“In Big Pharma for many years, the driver was finding synergies with the commercial side,” he says. “Now, if you look at what's happening with biotech, they're trying to keep those new entities at arm's length to avoid spoiling them with the Big Pharma model.”
You say toh-may-toh
Millennium's story is heartening, but after a whirlwind decade of mega-mergers in the life sciences industry, everybody's heard the horror stories—of innovative biotechs suffocated by the cold embrace of their new pharma masters, or big pharmas shoehorned into even bigger pharmas with little regard for employee morale—and many have stories of their own.
Some are less horrible than comical. The merger of Astra and Zeneca in 1999 was an awkward marriage pairing Zeneca's straight-laced, conservative culture with Astra's more freewheeling mien. “Astra was perceived as having an innovative, decentralized, fast-moving culture with fewer controls,” says Lynn Tetrault, EVP, HR and corporate affairs at AstraZeneca. “Zeneca was seen as the more conservative, formal partner that was concerned with process and governance.”
In the US, for example, Zeneca had a traditional suit-and-tie culture, while Astra was business-casual, in those days when business-casual was still cutting edge. As a result, says Tetrault, “We had to change the policy quickly, because people would put ties on and take them off on the way from one site to another!”
The companies conducted a survey prior to consummating the merger and found a strong preference among both organizations for a “meeting in the middle,” with Astra employees wanting more structure and Zeneca staff less. And so, says Tetrault, that's what they did, producing a mission and a vision that melded the two firms' cultures, along with a 50-50 management team.
Of course, this being one of those old-fashioned synergistic mergers, there were efficiencies to be realized and redundancies to be eliminated. AstraZeneca, says Tetrault, handled it “by being transparent, providing a fair and respectful staffing process and offering very competitive severance and outplacement support if employees could not find an alternative job in the company.”
Mind the “empathy gap”
Many mergers are plagued by an “empathy gap,” says ZS's Raoult, as the survivors in upper management forget how it felt to be on the chopping block the minute they get their hands firmly wrapped around the ax handle.
“So that's going to propagate throughout the organization, and this anxiety is going to drive people to forget about their jobs and focus on themselves, and if it's bad enough, they'll move,” he says.
Hence the need for speed in making workforce reductions and assembling a new organization, says Raoult—it's more humane, and better for your organization, to hand someone a pink slip today than to leave them hanging under a Sword of Damocles for weeks. But of course it's not that simple.
“You need to do it fast and well,” says Raoult. “One tendency is to try and make those exercises as quickly as possible. The other is to say, ‘Well, we need to take the time to bring people on board and make sure we design the best possible organization for the future because we are going to have to live with it for two, three, four years before we change it again.' Some companies rush it and maybe their planning and design is a little light, and they think they'll figure it out as they go, but in many cases you're stuck with what you decide at that time. So somehow, you have to put the cursor between those two.”
Mergers also open a window for really fundamental transformation. “There's an open time for changes when you merge two companies,” says Raoult, “because people are very destabilized and they expect change, so it's a perfect time to do it and you can make some very radical changes. If you don't do it now and instead, you tell them six months later, ‘Okay, now we're going to change,' then you've got big resistance. So, the ideal is to plan ahead, in the background, and work with them as soon as legally possible to get the plan and implement it quickly.”
Involving employees in the planning process can somewhat ease the pain of transition. “Not only do you get people out of the anxiety zone but even if people don't know what their job is going to be, you get them focused on recreating or co-creating their organization and you get buy-in from them,” says Raoult.
When AstraZeneca acquired MedImmune in April 2007, they established a collaborative transition process with open and transparent communications, emphasizing how much they valued the independence and entrepreneurial spirit of MedImmune and eschewing a formal induction process. “As a result, we were able to keep them focused on business as usual,” says Tetrault.
The company held intimate “town hall” style Q&As with the leadership of each company for employees of the other and stressed that MedImmune would remain operationally independent but strategically aligned with its parent. “Our most important priority was to maintain the intellectual capital within the firm, as that is the key to its value,” says Tetrault. Like Takeda, AstraZeneca also offered a one-year retention bonus to all of its staff.
“Maintaining the organizational independence was one aspect of retention, as that environment was what the MedImmune employee valued,” says AstraZeneca's Penny Stoker, VP, global HR services. “At the same time, we wanted to create a sense of excitement about being part of a larger whole. To do that, we worked to determine key messages and interaction points across the two organizations, ensuring that employees had broad knowledge of what each side did. This gave MedImmune employees a broader context on AstraZeneca.”
Millennium employees were similarly energized by a new challenge —that of taking Takeda's oncology portfolio into the top tier by 2020—as well as new products and resources and a global reach. The company, based in Cambridge, MA and boasting around 1,000 employees, is in the process of absorbing Takeda's Chicago-based US oncology research operations, and is hiring for an additional 100 posts. The firm continues to inhabit two buildings on a campus a stone's throw from MIT. “That's one of the real positives of the company,” says Millennium's Gansler. “If we were 10,000 people, it would be difficult to be co-located and have the level of interaction that we have here.”
So Millennium gets to have it both ways—an intimate environment and a massive global footprint. “Takeda has the resources to enable us to help achieve their vision, and they have an international infrastructure in place,” says Gansler, noting that the company had to partner with Johnson & Johnson to market Velcade overseas. “We're in a fairly aggressive hiring mode, which is counter to what's going on in the industry right now, and as a result, there are more opportunities available. We're completely intact.” The reporting structure hasn't changed, except that Millennium CEO Dunsire now reports to Takeda Pharmaceuticals Corp. president and CEO Yasu Hasegawa.
But perhaps most importantly, Takeda took great care in reassuring its employees. “From the very beginning with them, they were very interested in our employees and placed a lot of value in the development of people and the retention of people,” says Gansler. “Typically companies are looking for synergies, opportunities to reduce staff and save money. Takeda said from the outset that their focus was on retention and growth.”
Such attentiveness to conserving expertise is rare, says Raoult. “When you buy a company, are you buying the product portfolio or the people and the expertise? In most cases, companies buy the products first and really focus on that, but if you don't take care of the people, you lose the expertise, and then you have to reinvent everything from the bottom up and you lose two or three years, because to build this expertise takes time.”
Of course, melding divergent cultures isn't easy, even with the most capable and considerate management.
“We have to be reasonable about how far we can move things, because in practice, it won't be perfect,” says Raoult, recalling a recent meeting with a client that had undertaken a merger several years before. “There were eight people around the table—four from Company A and four from Company B—and they were sitting together on opposite sides of the table unconsciously. They were still relating three or four years later as though they were part of different organizations. My joke is, your merger will be over when your group is merged with yet another company—then they find kinship through shared pain!”