There’s no let-up in the pharma industry acquisition pace. Yesterday Mylan ($MYL) rejected Teva Pharmaceutical ($TEVA)’s $40.1 billion buyout offer and reinforced its intent to pursue its acquisition of Perrigo ($PRGO).
Mylan Chairman Robert Coury previously cited standard, potential deal obstacles – undervaluation and industrial logic – as well as a more oblique reference to cultural obstacles. However, yesterday’s statement from Coury and the Mylan Board was much more pointed, with critical references of Teva’s culture and leadership. It referenced specifically a disconnect between how Teva Teva CEO Erez Vigodman described the changed culture of the company and how Coury experienced it in how Teva approached Mylan and how it shaped his belief about Teva’s culture.
“For the sake of your current and future shareholders, employees, patients, customers, communities and other stakeholders, I do hope you find a way to eventually change Teva’s culture and establish credibility in your business dealings. However, we do not wish to make Teva’s problems Mylan’s problems.”
Some would call this posturing to get Teva to raise its offer, and the Mylan board said it won’t consider talks to sell the company unless it gets an offer of significantly more than $100 a share (up from Teva’s offer of $82 in cash and stock last week). However, the references to culture, credibility and leadership took me aback for a couple of reasons. First, if indeed the deal goes through, how does any Mylan (or Teva employee for that matter) get past those words no matter what happens afterward? Second, what should Teva do to counter what’s now been put out there as one of two of the most significant reasons why the deal won’t work?
The title of this Bloomberg article about Teva CEO Erez Vigodman is also telling: “Straight-Talking Teva Boss May Find Mylan Toughest Target.” Indeed. Especially when 75% of mergers fail to meet their objectives due to issues related to people, communication, and culture.
No one following this deal would doubt that the “soft stuff” – integrating leaders, teams and culture - will be the hard stuff should this deal go through. So what will come next for Teva? No matter whether they push ahead with a hostile takeover of Mylan, or pursue another target, Teva can take a few steps immediately to position themselves well for whatever happens next.
While a hostile takeover differs in obvious ways from a friendly merger, we recommend 4 steps to unlock the full potential of any M&A deal:
- Plan for the complexity of the challenge. Successful mergers reward planning that considers both the short and long games: from closing the deal to the long, difficult work of integration that often gets in the way of strategy execution. The heated words flying back and forth now could have long-term unintended consequences.
- Communicate with employees fast. Both Teva and Mylan employees should hear quickly from their respective leadership teams to understand each company’s rationale, strategic vision, and how they should make sense of these maneuvers that may impact their futures.
- Create the compelling story for change. In our 17 years of supporting M&A integration, these efforts are most successful when the narrative for change goes beyond dollars and cents to reach hearts as well as minds.
- Align and equip executives to lead change. Studies prove up to 90% of employee behavior stems from role modeling and coaching actions of leaders. Both Teva and Mylan should think hard about the leadership behaviors they’re modeling for their respective organizations.
Teva shouldn’t wait to address Mylan’s highly targeted statements around culture and leadership. It makes all the sense in the world, no matter whether the company continues to play in the pharma M&A game or stands on the sidelines.
