Merger and acquisition (M&A) deals among contract research organizations (CROs) have always occurred. But the last few years have seen an unprecedented increase, and industry experts say the trend isn’t slowing down. In 2021 alone, 50 CROs closed M&A deals, compared to just 29 deals the year prior.
M&A deals can be extremely beneficial for small CROs. Being purchased by a larger entity reduces financial uncertainty while presenting opportunities to scale. Likewise, these acquisitions expose small CROs to additional markets and clients.
However, M&A deals can also cause disruption, as teams converge and processes intersect, and these growing pains are often felt by sponsors. As a clinical trial sponsor, it’s ultimately your responsibility to maintain the integrity and quality of the trial data. But if an M&A deal with one or more of your vendors closes during the same time that your trial is being conducted, it can throw a wrench in things; affecting your deadlines and productivity.
In this paper, we look at the growing M&A trend, highlight some of the challenges that M&A deals present, and discuss how investing in vendor oversight services can ensure quality, timeliness, and peace of mind.
Mergers & Acquisitions: A Closer Look at the Numbers
In 2021, the healthcare industry spent about $160 billion on M&A deals, nearly double the amount ($85 billion) spent in 2012. Private equity investors say there’s a good reason for this trend: money.
According to an analysis published earlier this year in Clinical Trials Arena, “CROs are prime cash flow models which makes them very attractive for private equity investors as an asset class.”
Even with all of the financial benefits that M&A deals offer, challenges can arise.
Merger & Acquisition Deals: Potential Drawbacks to Watch Out For
In an article published last fall for Applied Clinical Trials, author Christine Bahls noted that mergers “can force sponsors to reevaluate their relationship with the new CRO, or perhaps look for a new one…If that happens, the integration can lead to turnover, system-integration irritations, and service disruptions.”
Let’s take a closer look at some of those drawbacks that Bahls refers to, including:
1) Employee redundancies and/or increased turnover
When a new CRO takes over, it causes a ripple effect within your existing CRO. For example, during the merger, the buying partner might identify redundancies or determine that certain departments are no longer needed.
These changes can affect your progress by eliminating long-term relationships through attrition or workforce disruptions. The Project Manager, CTM, Lead DM, and other key people that your team communicates with regularly may suddenly be gone or reassigned to a different sponsor.
2) Problems with your business’s hierarchical structure
Often, M&A deals result in a complete overhaul of a business’s hierarchical structure. Certain departments might be combined with others or eliminated entirely, depending on the size of the acquiring company. Though a normal part of the process, M&A deals often result in some (or all) of the executive team leaving. Without a transitional plan in place, chaos is almost inevitable.
3) System and Process integration disruptions
When two CROs join forces via a merger, both companies must smoothly integrate all of their SOPs, data, and systems. Since every business approaches their software, hardware, and communications systems differently, creating a seamless marriage takes time. Additionally, SOPs that your CRO has been following for the execution of your trial may now be suddenly made obsolete and replaced with new procedures.
While challenges are a normal part of any M&A deal, without someone managing all aspects of the system and process integration, important data and observations might fall through the cracks or process deviations may occur.
4) Severed lines of communication
Mergers and acquisitions have long been a part of the business landscape, but that doesn’t make them any easier for the employees or clients in their wake. Too often, CRO executives focus on the transactional aspects of a deal without keeping team members and sponsors informed. This results in conflicting expectations or even worse; diminishing quality and noncompliance.
Vendor Oversight Services: Taking the Uncertainty Out of M&A Deals
M&A deals within the industry are becoming increasingly common, but that doesn’t mean sponsors have to operate from a place of uncertainty.
At Harbor Clinical, we understand the pressure you’re under to maintain quality data. If an M&A occurs within your CRO during a trial, you’re right to be concerned. But the solution is straightforward –– vendor oversight services.
As a functional service provider with nearly a decade of experience, we can help you establish quality control systems, emphasizing three specific points:
1) Formalized oversight. We have part-time and full-time subject matter experts who can work with you during each phase of your clinical trial. Their daily quality control checks and monitoring ensure data accuracy and integrity.
2) Collection and analysis of Key Performance Indicators (KPIs). Our vendor oversight specialists gather and analyze specific data points, over the course of your trial. These key performance indicators help us identify inefficiencies and make improvements to our service offerings.
3) Effective two-way communication. Smoothly integrating two teams requires clear communication. With our team providing vendor oversight, you can keep the lines of conversation open.
If you’re preparing for (or currently going through) a merger or acquisition, you probably have questions and concerns. Our vendor oversight specialists can help you establish a quality control plan. By taking action now, you can prevent headaches later, because an ounce of prevention is worth a pound of cure.
Interested in learning more about our vendor oversight approach and response? Please send an email to [email protected] or call (781) 775-0342 today.