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Winter 2011

Business Consolidations: Lessons Learned During The Acquisition of Associated Anesthesiologists, Inc., by Anesthesia Business Consultants, LLC

K .D. Lowe, MHSA
Senior Vice President, Western Region, ABC


“Action and reaction, ebb and flow, trial and error, change — this is the rhythm of living. Out of our over-confidence, fear; out of our fear, clearer vision, fresh hope. And out of hope, progress.” – James Levine

Sometimes we wonder if there is truly a rhythm to life, but one thing is more certainly true, and that is that change happens. When it does happen, the piece of change called ‘transition’ can be the hardest part. In business, the transition period accompanying mergers and acqui- sitions often provides more of a cacoph- ony than a melodious and smooth tune; harder to follow the notes and definitely difficult to put to an instrument and play. Those who have gone through a merger or acquisition may recognize some of the learning points that follow. We will dis- cuss here communication, cultural blend- ing, fear of the unknown, technology im- pact, human resource policy and organi- zational approach. This is a smattering of the lessons learned during the acquisition of Associated Anesthesiologists, Inc., by Anesthesia Business Consultants, LLC, undertaken late in 2007.


In the beginning

“The void created by the failure to communicate is soon filled with poison, drivel and misrepresentation.” – C. Northcote Parkinson

Tell as much as you can, to as many as you can, as soon as you can. During a transition you cannot possibly over- communicate. Define what is changing and what is staying the same, why is this change necessary and what is to be gained. This is key to directing energy and angst from the fear of change to what really is changing and to provide a sense of security. We humans are all creatures of habit and tend to become anxious and fearful when too much changes too quickly.

Individuals take in and process information at differing levels. It’s important to remember individuals respond to the change and make their peace with it based on their ability to let go of the old status quo and accept the new. Keep a close tab on the pulse of the membership and quickly respond to any underlying current of uncertainty or anger. Left unaddressed, anger and discord will breed among the membership and spread like wildfire. Individuals aren’t necessarily looking for a quick fix, more they are seeking acknowledgement of their feelings and to be heard. These feelings and reactions are normal as individuals deal with the impact of the change on their individual circumstance.

During Change

“It’s not so much that we’re afraid of change or so in love with the old ways, but it’s that place in between that we fear...It’s like being between trapezes. It’s Linus when his blanket is in the dryer. There’s nothing to hold on to.” – Marilyn Ferguson

You are going to have to maintain communications with all involved—not just to pass on new information, but to keep them feeling connected to the organization. Don’t be surprised at over- reactions. Again, different temperaments move through the change continuum at different speeds. For instance the leadership or planners of the transition started their transition first. These individuals will move through the transition at a much more rapid pace than those members of the rank and file. The further down the line away from a decision maker, the greater individuals feel the sense of loss, uncertainty and powerlessness. To counter this, ensure individuals get all the information they need; say everything more than once in several different ways, using different channels to do it and keeping the communication focused on managing endings. Be creative and informal—be available for the quick check-in over coffee or grabbing lunch. Offer to host a Question & Answer session. The greater your ability to reassure and respond to information the quicker your membership will process and adapt to the new world.


“All changes, even the most longed for, have their melancholy: for what we leave behind us is a part of ourselves: we must die to one life before we can enter into another.” – Anatole France

Loop back to the goals and the purpose for the change. Did we successfully meet the goals set? Review any remaining issues or group concerns. Prioritize and create an action plan. Check in with individuals to see how they are doing. Celebrate successes, even the small ones, along the journey.


“It’s nothing personal, it’s just business!” – Mario Puzo

It is ironic that in the seemingly sterile business environment of mergers and acquisitions great value is placed on the integration of business processes. Cliche?s may run rampant as we tend to put high value on keeping things “all business.” In reality, business is very personal. Human relationships, abilities to learn and the personal aspects of relationship-building play an integral, even critical part in the success of a business. Therefore it makes good business sense to give significant attention to addressing the human aspects of a merger.

In an effort to integrate business process, it is absolutely necessary to address the reality of integrating business cultures. The challenge is in:

  • Blending two distinctly different corporate cultures
  • Facilitating the creation of a hybrid corporate culture through true and focused cross-pollination of best practices within both organizations
  • Overcoming limitations that geographical boundaries impose on teaching and learning in a new structure

Not Simply a Business Transaction

As two companies merge operations, a companion integration of different business values, cultures and workforces is paramount to coming out on the other end of the merger with one cohesive work unit. The blending of two well- established corporate cultures is easier said than done.

Cross Pollination - Keeping the Best of Both Worlds

It is easy to forget in the process of merging, that the acquiring entity valued what the acquired entity had to offer in some form or fashion. Therefore, to achieve the best outcome of the acquisition, the goal has to be to take the best of both worlds to create a superior hybrid of both the acquired and the acquiring company.

Geographically Imposed Limitations – Meeting in the Future, Living in the Past

“Teamwork doesn’t tolerate the inconvenience of distance.” – Unknown

Working in different time zones and across vast geographical distances requires flexibility from all parties and the use of creative methods for communication and teaching. Time and distance aren’t the best catalyst for effective communication or efficient operational function, let alone successful employee training on new processes, procedures and systems.


To address the challenges time and distance present and to achieve the best of both worlds through cross pollination and blending of cultures, here are a few lessons learned:

Flexibility is critical — Ensure that people on both sides of the knowledge transfer understand the time zones and work schedules of the people involved. Develop opportunities and schedule meeting times that make sense for all parties. Agree on a time window for joint business actions and make sure that transfer of knowledge and work processes, important decision making meetings and communications are coordinated to occur in that timeframe.

Documentation is critical — In all cases when meetings occur, have someone take minutes and assign action items. Then these minutes can be shared, used for clarification of decisions that were made and built upon to facilitate progress in future related meetings.

Relationship building is critical — Connect subject-matter experts to their counter-parts on the other side of the merger. Knowledge transfer extends beyond the typical transition of data and information. If data and information were all that mattered, one massive manual documenting all of the information that people needed to know would suffice. However, knowledge transfer involves human beings and learning styles must be addressed. In addition to the trading of information, the knowledge transfer must also accomplish a common understanding of the scope of business processes, organizational structures and other “tribal knowledge” about the way things really get done in an organization. Once the knowledge holders are identified:

  • Convey a common purpose for the interaction on both sides of the transfer.
  • Provide structure for the interaction.
  • Identify the responsible party for documenting processes and information that is shared between subject matter experts.
  • Encourage the use of a variety of interactive techniques, for example:
    • Mentoring—parties on both sides of the merger have something valuable to teach the other
    • Guided experiences
    • Work shadowing

Checking assumptions and clarifying understanding is critical— The “language” or vernacular of each organization differs. One simple example is that Job Titles that sound similar may represent vastly different functions. One organization’s Administrative Assistant to the VP of Operations, could be the other organization’s Assistant Operations Manager. Match the right people up with their correct counterpart. In general, it is good advice to question meaning and clarify intent even more so than in normal business situations.

Creating a Feedback Loop is critical — Ensure a continuous feedback loop between parties for all of the above. It is not enough to show someone how to perform a specific task, once. For the knowledge transfer to be a success, there must be a feedback loop that provides clarification and refinement of the information received.

Fear of the Unknown

“Only the unknown frightens men. But once a man has faced the unknown, that terror becomes the known.” – Antoine de Saint-Exupery

A transition from one thing to another inevitably leaves people dealing with the fear of the unknown. A lot of this fear is related to new management. It can be particularly disconcerting when management changes from local control to management at a distance. It is very difficult at first to learn to operate under a management team that is virtually unknown to the staff. One may not see them; and may not know them. Although it may be more difficult to build a relationship via email and phone than it is in person, the effort is well worth it. Staff who build partnerships with counterparts that operate at a distance must, at the same time, see themselves as being part of a larger, even global picture, versus a separate self-standing unit.

As staff learns to work under the new leadership they may experience a certain loss of control. They are no longer able to simply make decisions based on the needs of their stakeholders, but have to learn to integrate all of those needs using the new organization’s model and new company policies. In the beginning, there may be a tendency of some to have the opinion, “This is the way it has to be done because this is the way we’ve always done it.” It becomes necessary to take a good, hard look at some processes and determine if they should be kept, changed completely to the new model, or modified to meet the needs of stakeholders while simply adhering “more closely” with new processes and policies. Staff and management have to work together to identify the best way to meet stakeholder needs and then partner within the new structure to make it happen. The budding partnership between the former companies will continue to grow and flourish only to the extent that the fear is dissipated, new knowledge applied and the birth of a new organizational structure accepted.

In addition to all that goes on before and during the transition, some employees also may feel fear at more than just change and loss of control, but also the unknown surrounding job security. There will usually be a period of time where many wonder whether or not they have a future with the new organization, or if the changes might mean a change in position. Hard work and dedication to the organization and its stakeholders means security for all of those who want it. Just as for anyone who faces significant changes, there is a grieving period, an acceptance period, and finally a move forward as a part of a new structure, devoted to providing the highest level of service to stakeholders and loyalty to the organization.


“Programming today is a race between software engineers striving to build bigger and better idiot-proof programs, and the Universe trying to produce bigger and better idiots. So far, the Universe is winning.” – Rich Cook

Computer System Integration

Merging two organizations in today’s world of technology involves the complex merging of legacy and newly emerging technology, particularly in the area of computers. It is imperative to understand and plan for the impact of merging computer systems on the systems themselves, as well on the people that use them. The change may involve sending or receiving information via a new communication pathway. This could be scanning information to a new location, sending and/or retrieving information electronically versus on paper, or using electronic interfaces to directly move information. These changes require training, explanation, testing and support from both of the new business partners. Again, depending on the depth of the change and the temperament of the individuals involved, these changes can be either smooth and orderly or painful and disruptive to the organization.

To effect a smooth transition, there must be adequate time devoted to documenting, testing and communicating how to use the new system. A proven option is the “train the trainer” approach where subject matter specialists identify lead learners or key members of the membership that are more adept at technological changes and train them, thereby multiplying those available to assist the less nimble in navigating a new system.

Parallel System Operations

There is much debate about the cost/benefit of running parallel systems during a migration from an old to a new system. For key business processes, where the livelihood of the organization is at stake, the risks to the organization in not running a parallel system far outweigh the associated cost with running parallel. One example of this might be where an organization is migrating to an fully electronic information system. Running a parallel system for the first 30 days by continuing to operate in a paper mode, while also running in the electronic mode allows a comparison between the two records, validation of the capture of all required information and feedback provision to the players regarding any discrepancies identified. The investment in time is offset by quick detection and capture of any missing services. Additionally, identifying and capturing the requirements of the merging entity can be inserted during the migration, allowing for minimization of downstream confusion and of risks associated with the costs of both hardware and software changes being required in the future.

Human Resourcing

“The closest to perfection a person ever comes is when he fills out an employment application.” – Stanley J.

Staffing levels are a matter of negotiation in a merger or acquisition. Economies of scale should be certainly considered as a potentially efficient approach to this determination. However, one of the next most angst-producing areas requiring attention is how to integrate differing benefit structures.

Benefit Plans Integration

Integrating the benefit plans of two or more organizations following an acquisition or merger can be very complex. Unfortunately, the business decision-makers that plan and execute a merger or acquisition are not always those primarily concerned with company benefits. Consequently, the impact of these activities on benefits is usually left to be dealt with as an afterthought in the process or even ignored until after the merger or acquisition has been accomplished.

Regardless of when it occurs, the first steps to integrating benefits plans are understanding both organizations’ ERISA plans and obligations, identifying any hidden or contingent liabilities and the implications of various course of action (plan merger, plan termination, or leaving the plan with the seller). Keep in mind that there are a myriad of different state, federal and tax laws and notices that must be considered when merging benefit plans.

In efforts to merge or integrate multiple benefits plans, not only will you be challenged by the technical aspects of this process; but also by the impact on employee morale and how those programs were tied to organizational culture. It is important to recognize that while merging and changing benefit plans may be necessary for the organization, it will have a significant impact on employees both financially and emotionally. In many instances benefit changes are or may be perceived by employees as a cut in compensation or losses. This is an area where organization managers and leaders may want to hide behind that previously mentioned adage that “it’s nothing personal, it’s just business.” However, for employees, pay and benefits are very personal, and their reactions are also very personal.

Most employers recognize the need to communicate with newly acquired employees. The counsel to “tell them what you’re going to tell them, tell them, and then tell them what you told them” is appropriate. However, it should be modified so that your communications strategy is “tell them what is going to happen, and why, tell them what is happening, and why, and tell them what has happened, and what they can now expect.” It’s the “why” part of the communications that is often missing. When employees are acquired, their lives are infiltrated with uncertainty. They may not remain employed. They may change reporting structures. There may be different processes and procedures that govern their work. There may be new expectations and other changes that will cause anxiety levels to rise. Adding uncertainty about the future of their benefits or improperly setting expectations may increase the employee relations issues, behavior issues and even productivity. Answering the “why” question can serve to minimize or even eliminate some of that uncertainty.

Creating a “win-win” for both the organization and the employees when integrating benefit plans require organizations to: begin planning early, allow sufficient time; be knowledgeable and comply with regulations; involve the right people early in the process; understand the details involved; and most importantly, be pro-active in communication with employees. This will reduce the amount of work imposed and reduce surprises, and building a better benefits program for the entire organization.


“When you jump for joy, beware that no one moves the ground from beneath your feet.” – Stanislaw Lec

Mergers and acquisitions invariably create uncertainty... or do they? More appropriately stated, one might say that those that undertake to lead mergers and acquisitions create uncertainty. A more studied and proactive approach to handling the issues discussed herein might result in decreasing some of that uncertainty. Learning from past history can provide valuable insights into the causative factors and enable leadership to avoid some of the pitfalls. George Santayana once noted, “We must welcome the future, remembering that soon it will be the past; and we must respect the past remembering that it was once all that was humanly possible.” Doing all that is humanly possible may be a good goal when entering into mergers and acquisitions.

K.D. Lowe, MHSA, serves as Vice President of Operations for ABC. Mr. Lowe gratefully acknowledges the contributions of his co-authors at ABC Western Region: Kathy Payne, Kathleen Hodgins, Theresa Osburne and Eileen Kuffner. He can be reached at