Is costumer base overlapping attractive in a M&A scenario? What happens to cross-selling?

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New answer on May 22, 2020
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Anonymous A asked on Apr 14, 2020

Literature is contrasting. Does Costumer Base overlapping spur cross-selling? Thank you!

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Francesco
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replied on Apr 15, 2020
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Hi there,

as mentioned by Vlad and Robert, it depends on the products and possibly also on the ancillary services offered. You may have different situations, for examples:

  1. Complementary products (eg hotel services and tour operators). In this case, you may expect cross-selling
  2. Substitute products (eg different varieties of wines with the same price tag/quality). In this case, you could actually have cannibalization rather than positive cross-selling
  3. Unrelated products (eg different kinds of e-commerce). In this case, there is no clear answer – there may or may not be cross-selling opportunities, according to whether the customer can find convenience in something different from the products themselves (eg convenience of a single point of purchase/delivery)

Best,

Francesco

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Vlad
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replied on Apr 15, 2020
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Hi,

It depends on the products you have:

  • If it is a vertical M&A of the producer / distributor - even if the customer base overlaps it doesn't matter
  • If it is a horizontal M&A of the two companies - you need to find out what are the cross-selling opportunities (other products or services)

Best

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Robert
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replied on Apr 14, 2020
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Hi Anonymous,

Good question and not so obvious in the first place!

Answer: it depends on the products the companies are selling.

  • Similar/same products: overlapping customer base does not add a lot of value since cross-selling opportunities are minimal (customer from company A has already a similar product as the customer from company B could purchase).
  • Different complementing products: overlapping customer base is a plus because you get access to a significant customer base with according 'big data' and you have cross-selling and/or up-selling potential.

Hope that helps - if so, please be so kind and give it a thumbs-up with the green upvote button below!

Robert

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Anonymous A on Apr 15, 2020

Could you please elaborate the up-selling opportunity please?

Thomas
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replied on Apr 16, 2020
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Overlap can result in higher opportunities for both cross and upselling, more synergies, as well as a better understanding of the target market. The latter is specifically relevant in data-rich environments or in a business with an advertising business model.

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Clara
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replied on Apr 15, 2020
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Totally depends!

What you can know for sure is that the higher the overlap (in clients, segments, customers, geographies, etc.), the higher the cost synergies will be.

Best,

Clara

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Udayan
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replied on Apr 16, 2020
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As others have indicated it requires further probing

If you are selling goods that are complimentary, which is to say they will be used together (phone and charger for example) then it is cross- selling. If you sell products that can be used as substitutes (2 versions of an adroid phone) then you are 'cannibalizing' as opposed to cross-selling

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Anonymous replied on May 22, 2020

Dear A,

I wish I can get more specification and clarity to answer your question properly.

Best,

André

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Antonello
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replied on Apr 30, 2020
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Hi, there is no general rule applicable to every case. It depends on the problem, on the client, and on the competitive environment / industry. Do you have any specific case in mind?

Best,
Antonello

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Francesco gave the best answer

Francesco

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