Getting cold feet?: Why health care mergers are abandoned.

Abstract

Despite the frequent occurrence and sizeable consequences of merger abandonment in other sectors, there is no thorough understanding of merger abandonment in health care. The purpose of this study is to improve the understanding of determinants of health care merger abandonment. On the basis of the literature on merger abandonment, we formulated a framework on potential determinants of health care merger abandonment. We then constructed a survey that was sent to 70% of all executives of Dutch health care organizations (response rate = 35%, n = 291). We provide descriptive overviews of open, multiple-response, and multiple-choice questions on merger abandonment and use chi-square tests and Fisher's exact tests to test whether abandoned and completed merger processes differ. About 62% of the respondents were involved in at least one merger process during the period of 2005-2012. Thirty-eight percent of these respondents reported that their last merger case ended prematurely (n = 53). The most frequently mentioned determinants of merger abandonment are changing insights on the desirability and feasibility during merger processes, incompatibilities between executives, and insufficient support for the merger from internal stakeholders. We did not find significant relationships between merger abandonment and executives' previous merger experience, degree of organizational diversification, health care sector, size differences, or other organizational differences. Our findings partially confirm results from previous studies, especially with regard to the importance of changing insights and incompatibilities between the involved executives in merger abandonment. We also find that pressure from internal stakeholders, particularly nonexecutive directors, and distrust, fear, and animosity play an important role in merger abandonment. To minimize the organizational and societal costs of abandoned mergers, we advise executives who engage in mergers to construct backup plans with alternative strategies in case the merger is abandoned and to conduct a thorough analysis of pros and cons before the merger.