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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M&A cases - synergy examples
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Hi,
For Synergies Calculation cases you can use the following structure:
- 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.)
- Cost synergies - typically you use a value chain structure tailored to the industry (e.g. supply-production-distribution-marketing-after sales support)
- Capital synergies (Not relevant for consulting interviews. But you should mention them if applying to private equity)
- Risks - major risks that can decrease the synergies (tip: don't underestimate the merging companies culture factor)
- 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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