Finland has seen horrible scandals involving large private healthcare companies, owned by private equity companies, who have had elderly care homes closed because they failed to look after their patients properly. Deaths have been reported alongside many horror stories of the elderly being left for long periods without promised care.
One Harvard Business Review (HBR) article from May 2016 states that 60% of M&A fail. In June of the same year another report in HBR states that “M&A is a mug’s game: Typically 70%–90% of acquisitions are abysmal failures.”
Mergers and acquisitions fail because two organisations come together without proper planning and foresight. The reasons for failure can easily be explained by the differences between organisations, the types of processes, the bosses and the other people who wok there are normally. It should be no surprise but the rewards to banks and consultants, who advise them, are huge like the rewards to those who sell out. Also buyers always appear to be too optimistic when promised huge cost savings and easy growth.
Building companies ands other organisations is never easy and here are seldom short cuts.
It is the same with outsourcing of public services to the private sector. The public sector and the private sector have completely different objectives that seldom if ever match. They are in fact 2 entirely separate worlds. One is concerned with producing basic services efficiently at the lowest possible cost in a sustainable manner and the other wants to make money from running this services. There is no reason to believe that the public sector is by its nature inefficient. The public sector is relatively efficient if it is allowed to do its job with skilled motivated people. Just look at our education system, our healthcare system our public transport system. They are better than most countries around he worlds and they can always be improved upon.
The worst myth that the private lobbyists want you to believe is that the private sector has a monopoly on efficiency.
That does not mean that outsourcing will always fail but it does mean that success is less common than what the parties are saying.
We now know of two major outsourcing disasters in the UK. The two largest companies in this sector, Carillion and Interserve, have been the biggest recipients of outsourcing business from the UK government for hospitals, healthcare, prisons, waste management, military installations, IT, schools, and many other services required by the public sector. Carillion’s turnover in 2017 was €5 billion, and has now been closed down while Interserve, whose turnover in 2017 was €3,5 billion is being restructured with big risks to the public sector. The Royal Bank of Scotland is one of the biggest lenders in the government led support operation. This bank one of the most active banks involved in such outsourcing in the UK and abroad, including Finland, was saved from bankruptcy by the UK government and effectively nationalised art a massive loss for taxpayers.