Cookie and Privacy Settings

This website uses cookies to enable essential functions like the user login and sessions. We also use cookies and third-party tools to improve your surfing experience on preplounge.com. You can choose to activate only essential cookies or all cookies. You can always change your preference in the cookie and privacy settings. This link can also be found in the footer of the site. If you need more information, please visit our privacy policy.

Data processing in the USA: By clicking on "I accept", you also consent, in accordance with article 49 paragraph 1 sentence 1 lit. GDPR, to your data being processed in the USA (by Google LLC, Facebook Inc., LinkedIn Inc., Stripe, Paypal).

Manage settings individually I accept
expert
Expert with best answer

Vlad

97% Recommendation Rate

406 Meetings

11,397 Q&A Upvotes

USD 239 / Coaching

1

Is 'synergies' as a separate bucket MECE?

Hi Everyone,


As I am approaching my final round at McKinsey, I have started to become fussier about my issue trees and whether they are MECE.
I came across this 'textbook' M&A case on one of the business school books:
Your client is a concrete manufacturer and is considering acquiring a small local firm in the concrete manufacturing industry. What factors should be considered?
So, my approach has five buckets which are 5 micro-hypothesis:

  1. The client current position is suited to an acquisition
    • current customer segmentation and regions of operations etc
    • Capabilities:
      • We lack capacity and we want more or new channles/markets
      • We have not mastered some new process
      • We have not quite reached ecnomy of scale
    • We can afford it
  2. The target company is a good fit and we can generate value
    • We can generate substantial synergies
      • Revenue syn...
      • Cost savings syn...
    • The company is not overvalued
    • There is no obvious cultural clash
    • The cost of integration is known and acceptable
  3. The demand (industry) is big and growing and justifies the acquisition
    • Growth rate, growing segments and stuff along those lines
  4. There are no hurdles to this acquisition
    • No regulatory obstacles
    • Competitors are not expected to retaliate
  5. There are no better alternatives
    • Joint venture?
    • Other target companies?

What do you think? I see a lot of people have a separate bucket for Synergyes. Is it wrong to have it in the target section? I look forward to your feedback.

Thank you!

Best,

Andy

Hi Everyone,


As I am approaching my final round at McKinsey, I have started to become fussier about my issue trees and whether they are MECE.
I came across this 'textbook' M&A case on one of the business school books:
Your client is a concrete manufacturer and is considering acquiring a small local firm in the concrete manufacturing industry. What factors should be considered?
So, my approach has five buckets which are 5 micro-hypothesis:

  1. The client current position is suited to an acquisition
    • current customer segmentation and regions of operations etc
    • Capabilities:
      • We lack capacity and we want more or new channles/markets
      • We have not mastered some new process
      • We have not quite reached ecnomy of scale
    • We can afford it
  2. The target company is a good fit and we can generate value
    • We can generate substantial synergies
      • Revenue syn...
      • Cost savings syn...
    • The company is not overvalued
    • There is no obvious cultural clash
    • The cost of integration is known and acceptable
  3. The demand (industry) is big and growing and justifies the acquisition
    • Growth rate, growing segments and stuff along those lines
  4. There are no hurdles to this acquisition
    • No regulatory obstacles
    • Competitors are not expected to retaliate
  5. There are no better alternatives
    • Joint venture?
    • Other target companies?

What do you think? I see a lot of people have a separate bucket for Synergyes. Is it wrong to have it in the target section? I look forward to your feedback.

Thank you!

Best,

Andy

1 answer

  • Upvotes
  • Date ascending
  • Date descending
Best Answer
Book a coaching with Vlad

97% Recommendation Rate

406 Meetings

11,397 Q&A Upvotes

USD 239 / Coaching

Hi,

First of all there is no "Right" or "Wrong" approach:)

Secondly - text books solutions, even from the best b-schools are rarely well written, since they are written by caseclubs of these schools, not by the professors or experienced consultants. I would say that at the top b-schools people are not well-prepared in general since the interviews are pretty relaxed with the students getting 2-3 offers easily.

Thirdly, in real life you should start with clarifying questions:

  1. What's the measurable objective of the client - NPV, ROI, etc
  2. Clarifying the business model
  3. Any question that can help you narrow down your structure

Let me give you an example:

1) If the objective of the client is to calculate synergies, then you should have a structure around synergies (revenue synergies, Cost synergies, financial synergies, costs and benefits)

2) If the objective is different, then you can ask the clarifying question about the synergies. "Do we expect any potential synergies?".

  • If the answer is yes - that should be the part of your structure. Where exactly - depends on the objective. If the objective is valuation (NPV) - then it should be a separate bucket since the NPV for synergies is calculated separately.
  • If we expect no synergies - you don't even put it in your structure

Best!

Hi,

First of all there is no "Right" or "Wrong" approach:)

Secondly - text books solutions, even from the best b-schools are rarely well written, since they are written by caseclubs of these schools, not by the professors or experienced consultants. I would say that at the top b-schools people are not well-prepared in general since the interviews are pretty relaxed with the students getting 2-3 offers easily.

Thirdly, in real life you should start with clarifying questions:

  1. What's the measurable objective of the client - NPV, ROI, etc
  2. Clarifying the business model
  3. Any question that can help you narrow down your structure

Let me give you an example:

1) If the objective of the client is to calculate synergies, then you should have a structure around synergies (revenue synergies, Cost synergies, financial synergies, costs and benefits)

2) If the objective is different, then you can ask the clarifying question about the synergies. "Do we expect any potential synergies?".

  • If the answer is yes - that should be the part of your structure. Where exactly - depends on the objective. If the objective is valuation (NPV) - then it should be a separate bucket since the NPV for synergies is calculated separately.
  • If we expect no synergies - you don't even put it in your structure

Best!

(edited)

Related BootCamp article(s)

Competitive Response

In a competitive response case study, your job is either to analyze what your client should do in response to a move performed by a major competitor or to anticipate what competitors will do in response to a move performed by the client

Opportunity Costs

Opportunity costs are an economic concept to quantify benefits of (discarded) alternatives. They measure the lost benefits that occur if you choose the best alternative instead of the second best one.

Quiz

Approaching a Case

In order to get into consulting, the case study is the most important element of the interview. Here, you can learn the specific skills and concepts to solve them.

1 Q&A

Issue Tree

The Issue Tree Framework can be used to break down the problems of a case to its components and significantly increase your speed during case interviews.

Cost-Benefit Analysis

Investments or single business cases need to be evaluated based on a certain set of criteria. Since financial performance is the key criterion in most cases you need to have an idea about future financial impacts. A key tool to asses this impact is the cost-benefit analysis which is used to determine the net effect of potential revenues and costs.

1 Q&A

Related case(s)

Bain Case: Old Winery

Solved 68.3k times
Bain Case: Old Winery You have inherited the “Old Winery” from your grandfather, a winery which has been family owned for five generations and can be dated back to the 16th century. Half of the eleven hectares are used to grow white grapes, the other half to grow red grapes. They are grown in the conventional way, i.e. they are not organically farmed and certified. The vine stocks are in a good condition regarding age and care. Overall, only ¼ of the harvest is made into wine by the winery itself; the rest is sold. Your grandfather never wanted to change the image of the winery and left the managerial and administrative task to a young and energetic wine-maker. Due to the not so well-known brand , the demand for the “Old Winery” wine is currently rather low. You do not intent to run the winery operatively, given your limited knowledge of wine making, but find the idea of owning a winery exciting. Your plan is to give the winery some fresh impetus.
4.4 5 1858
| Rating: (4.4 / 5.0)

You have inherited the “Old Winery” from your grandfather, a winery which has been family owned for five generations and can be dated back to the 16th century. Half of the eleven hectares are used to grow white grapes, the other half to grow red grapes. They are grown in the conventional way, i.e. ... Open whole case

General Holding

Solved 44.6k times
General Holding Our client is a French holding company with annual revenues of about €1 billion.      Their portfolio consists of different companies that are mostly in manufacturing industries such as the oil & gas industry and the automotive industry.They do not have a specific investment focus. They prefer to buy the best companies available that are also related to their existing businesses. They are thinking about acquiring an auto parts dealer, OTOpart, and want to know whether you think it is a good idea.
4.3 5 1536
| Rating: (4.3 / 5.0) |

Our client is a French holding company with annual revenues of about €1 billion. Their portfolio consists of different companies that are mostly in manufacturing industries such as the oil & gas industry and the automotive industry.They do not have a specific investment focus. They prefer to ... Open whole case

Chip equity

Solved 37.1k times
Chip equity Our client is an electronics holding called Chip’n’Chip. They want to invest in a Printed Circuit Board (PCB) manufacturer called OnBoard, and asked you whether it’s going to be a good investment. How would you help them?
4.5 5 1292
| Rating: (4.5 / 5.0) |

Our client is an electronics holding called Chip’n’Chip. They want to invest in a Printed Circuit Board (PCB) manufacturer called OnBoard, and asked you whether it’s going to be a good investment. How would you help them? Open whole case

MBB Final Round Case - Smart Education

Solved 16.4k times
MBB Final Round Case - Smart Education Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvantaged areas. The client is considering starting operations for its services in the Chicago area. They hired us to understand if that makes sense. Due to the nonprofit regulation, SmartBridge should operate on its own in the market, without any partnership. How would you help our client?
4.6 5 561
| Rating: (4.6 / 5.0)

Our client is SmartBridge, a nonprofit educational institution offering face-to-face tutoring services. The client operates in the US. The mission of SmartBridge is to help as many students as possible to complete studies and prevent that they drop from the school system, in particular in disadvant ... Open whole case

Paper Print

Solved 15.9k times
Paper Print A printing company is planning to take over another printing company with similar technology and printing machines. The candidate is supposed to evaluate the acquisition by answering a line of questions that are presented in the “suggested approach” section.
4.2 5 350
| Rating: (4.2 / 5.0) |

A printing company is planning to take over another printing company with similar technology and printing machines. The candidate is supposed to evaluate the acquisition by answering a line of questions that are presented in the “suggested approach” section. Open whole case