How do mergers and acquisitions (M&A) in the health IT vendor space impact these companies’ customers going forward, post-sale?
Certainly, health IT vendor M&A is commonplace, and recent years have seen several big announcements in the electronic health record (EHR) space specifically, such as Cerner acquiring Siemens and Allscripts acquiring McKesson's hospital IT business.
A KLAS report provides an update on recent M&A activity and—by examining customer satisfaction before, during, and one year after a merger or acquisition—answers key questions posed by investors, vendors, and healthcare organizations such as:
- Do mergers and acquisitions have any inherent impact—whether positive or negative—on customer satisfaction?
- How can companies ensure their merger or acquisition is successful?
- Do healthcare-focused companies have an advantage over cross-industry players?
- Is there any difference in the success of public versus private companies?
The research revealed that almost all M&As result in notable change in customer satisfaction—the odds that customers will be left untouched are less than 20 percent—and the chances of satisfaction improving or declining are almost identical (42 percent and 40 percent, respectively). “This shows that M&A activity is not inherently bad or good, but there are clear differentiators between companies who see improvement and those who see a decline,” said KLAS researchers, who got responses from more than 2,000 customers.
“Vendors’ deliberate choices around cost, culture, and value determine which way the pendulum will swing,” KLAS researchers added. What’s more proactively making the right choices is essential—vendors who see a significant decrease in customer satisfaction in the first year typically take three to five years to recover, if they recover at all, the research noted.
Meanwhile, poor customer satisfaction in the wake of a merger or acquisition has a significant impact on customer retention, according to KLAS. On average, the number of customers looking to leave their vendor doubles one year after a poor merger or acquisition. The top cited reasons are frequent nickel-and diming, a decline in the quality of phone/web support, and stagnant product development.
Conversely, a strong merger/acquisition strengthens both customer loyalty and evangelism. This is because customers feel their vendor is aligned with their goals, cares about their success, and provides a sense of stability, the research revealed.
Companies who see increased customer satisfaction after a merger or acquisition most significantly improvements with value and culture. Comments from affected customers show that three key best practices help drive M&A success are: consistent pricing during the time of change; proactive communication to alleviate decision-maker concerns; and prioritizing delivering value over delivering new functionality.
On the other hand, when M&As go poorly, the three common themes that emerge, according to the research, are: poor executive involvement leading to poor problem resolution; overselling and overpromising leading to unrealistic expectations; and insufficient support, leading to customers feeling forgotten.
Also of note, the research found that companies with a healthcare-specific focus are more likely to see increases in customer satisfaction after a merger or acquisition, since such companies are often more aware of the level of communication, training, and handholding required for healthcare customers to achieve promised levels of success. What’s more, customers of private companies tend to fare better overall than those of public companies after a merger or acquisition.
