M&A cases - synergy examples

M&A Synergies
Recent activity on May 01, 2019
1 Answer
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Robin
Skilled
asked on May 01, 2019

I'm trying to understand some concrete examples of what a synergy might be in an M&A case. On the revenue side, I get how cross-selling would work but I'm struggling to understand how product compliments or R&D synergies might work. Could someone give an example of each?

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Vlad
Expert
replied on May 01, 2019
McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School

Hi,

For Synergies Calculation cases you can use the following structure:

  1. Revenue synergies - here you calculate the synergies in price and quantity (depending on the case it may be new geographies, new products, new distribution channels, bigger share on shelves crosselling opportunities, etc.)
  2. Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
  3. Capital synergies (Not relevant for consulting interviews. But you should mention them if applying to private equity)
  4. Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
  5. Total synergies potential in $, adjusted by risk (probability of failure)

R&D synergies - product IPs that one company has if another company can produce this product. Not sure what you mean exactly by product compliments. But for example a whiskey producer will have synergies with bottle or packaging manufacturer

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Vlad

McKinsey / Accenture Alum / Got all BIG3 offers / Harvard Business School
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