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business synergies


The final submission showed synergies with their associated costs, both one-time and ongoing.

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We just tell the line managers, ‘We expect you to build business by X percent.’ The line leaders don’t expect us to track them, as they see it as part of their business.”. It also guides, supports, and challenges the integration planning teams and provides quality control for materials that the teams provide to the integration steering committee. The IMO works with the integration teams to create roadmaps and milestones for each integration project, determine synergy timing by project, map interdependencies and risks, and develop KPIs to ensure steady progress. Finally (and not least), performance tracking gives companies a way to communicate postmerger progress objectively to the market—a move, BCG has shown, that yields tangible benefits.

In deals with revenue synergy potential, management should establish a revenue baseline (the premerger figure) during the integration planning phase. Tracking revenue synergies involves measuring not only the revenues generated from the synergies but also the underlying initiatives (and component actions) needed to reach the targets (which is actually easier). But companies plan and track revenue synergies with less rigor and transparency, largely for two reasons: they are harder to track, and leaders view revenue synergies more as part of their day-to-day business than as a distinct exercise.

Using the due diligence numbers as a foundation, companies should focus on the high end of the assumptions. It lays in the way we interact and collaborate. Boston Consulting Group is an Equal Opportunity Employer. As a result, they do more than augment total shareholder value. COMMUNITY SHOWCASE & BUS TOUR FACILITATION, We love what we do, and it shows. These teams address either critical cross-functional issues or opportunities (such as the customer experience) or specific critical issues (such as customer engagement or decisions from headquarters).

The company was poised to achieve significant year-over-year revenue growth from cross-selling, and the more than $100 million in cost synergies targeted for year one were on track. With a long-term experience, in-depth knowledge of international markets and a proactive, practical approach, BuSy can put together a solution specifically for your business.
Managers can see whether overlapping accounts are buying the same or similar products at different prices or terms and determine promptly at close how to resolve such discrepancies, instead of being surprised on day one by a client calling to complain or demand a huge discount. In a nutshell, company B followed a disciplined, pragmatic approach to pursuing merger synergies, from identifying and validating them to creating detailed plans with built-in accountability. By the six-month mark, four of the five newly constituted business units were not only beginning to realize savings, they were also enjoying an uptick in revenues despite an industry slowdown.

The synergistic effect of such transactions often forms the basis of the negotiations between the seller and the buyer.The following are the main types of synergies that corporations enjoy: Immediately after the closing, the company was ready to home in on stretch targets to streamline every key area: corporate overhead, cost of goods sold, procurement, even the sales and marketing teams. In simple terms, revenue synergies are nothing more than the gap between the additional revenues earned as a result of the merger and baseline revenues—those the company would expect to earn had the merger never taken place. It’s equally important to deconstruct and articulate the drivers of the savings at a high level. As a result, they can lose precious time and even jeopardize the confidence of their customers.

Cross-functional teams can develop clear-cut initiatives and roadmaps that, along with the associated KPIs, can be used as a management accounting proxy to deconstruct the source of the new revenues. Most leaders involved in mergers don’t fully appreciate the significance of setting stretch targets. These types of synergies relate to improvement in the financial metric of a combined business such as revenue, debt capacity, cost of capital, profitability, etc.

Success is shared (because those responsible for hitting the targets had a say in setting them), so teams are motivated to stretch further. Specifically, through the process of triangulation, companies can get a closer approximation of targets and see how much of a stretch is reasonable. Some targets had to be adjusted or reallocated to other teams.
As a result, they tend to approach it with inadequate rigor and granularity. MEDA Economic Development Week Event Moderator. The merger of two major US retailers illustrates powerfully the effect that tracking can have on achieving—or even exceeding—synergy targets. Once they are finalized (before or at the closing), the integration projects should be locked in to create “one version of the truth” to track against. Post-Merger Integration, As head of the integration management office, the integration leader heads up and coordinates the integration program. When they see they are hitting their targets, companies know not only that the merger is succeeding but that their assumptions were on point. Clean teams thus enable the acquiring company to eliminate blind spots and get a sharper picture of the target company without violating antitrust regulations or confidentiality agreements. Boston Consulting Group partners with leaders in business and society to tackle their most important challenges and capture their greatest opportunities. We enjoy envisioning and creating unique solutions to challenges. As the well-worn adage cautions, “If you don’t measure it, you can’t manage it.” Among the most common PMI oversights is the failure to systematically monitor synergies. Detailed information on the use of cookies is provided in our Privacy Integration Management Office.


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