M&A synergies

Case Interview M&A Case Synergies
New answer on Apr 09, 2021
6 Answers
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Anonymous A asked on Apr 07, 2021

Hello everyone,

In M&A cases, when we talk about synergies in the framework, should we be very specific and enumerate all synergies or just list some synergies and deep dive into that while we solve the case?

For instance, if a brewing company is acquiring another brewing company, for cost synergies, should I mention cost synergies in details like this:

-Procurement: negotiation with suppliers (bottles ..)

-Production: best practices, factory consolidation

-Distribution: more efficient sales distribution

-Sales: reduce salespeople, sales best practices

I am asking this question because it seems to me very long to talk about these details and come out with all of these tailored ideas while elaborating the framework.

Thank you

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Francesco
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replied on Apr 08, 2021
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Hi there,

I would not list all the synergies in the initial structure – that would indeed take too much time.

What I would recommend is to:

  • Present the synergies with an initial level (eg “In terms of synergies, I can think about revenues and cost synergies”)
  • Provide a few examples (eg “For example, for the revenue synergies, we may use one of the distribution channels of the company to sell beers there. On the cost side, we may be able to reduce the cost per unit of the raw material used for beers, negotiating with the suppliers since we are going to be bigger”)
  • Explain you are happy to expand it later if needed, so that the interviewer knows that you have additional points there (eg “I would be happy to analyze this further later on if needed”)

Hope this helps,

Francesco

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Ian
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updated an answer on Apr 07, 2021
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Hi there,

The list you provide is great - definitely adequate.

That said, your question isn't really about synergies, but about speaking concisely.

Never estimate the power of the "for example". What does this look like? Well, in your case...

"I see a number of cost reduction opportunites, for example/specifically, along procurement negotiations, production optimisation through process streamlining and factory consolidation, increased sales distribution efficiency, and consolidation/trimming down of sales teams"

Now, that didn't take to long did it?

(edited)

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Adi
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updated an answer on Apr 08, 2021
Accenture, Deloitte | Precision Case Prep | Experienced Interviewer & Career Coach | 15 years professional experience

Hey,

You need to be clear on following aspects before you think of a framework and solution:

  • Are you looking at cost savings/revenue synergies once the two firms have merged?
  • or is your question about evaluating synergies to make a decision on go/no-go for M&A or for integration once the M&A is done?

Cost Saving & Revenue synergies

  • Complementary products/services
  • Supply chain synergies
  • Shared IT
  • People synergies (from CEO to ground staff)
  • Scale efficiencies/Capital

Evaluating synergies for go/no-go

  • Financial analysis
  • Customer segments
  • Product/Service mix
  • Supply Chain

Integration

  • Processes
  • People
  • IT stack

Pick out the most relevant ones depending on the case and elaborate on key points. No need to drill too much per area..1 or 2 examples are good enough. Keep your overall structure to 3-4 branches.

(edited)

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Clara
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replied on Apr 09, 2021
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut

Hello!

I would for sure mention in the tree that there are significant cost symergies, and then introduce with a "for example" the different buckets that you have very well listed in the prompt.

This said, careful, since M&A is one of the caes in which there is most richness and details outside the purely "economic" side of the case.

Hope it helps!

Cheers,

Clara

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Udayan
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replied on Apr 08, 2021
Top rated McKinsey Case & PEI coach/Multiple real offers/McKinsey EM in New York /6 years McKinsey recruiting experience

For McKinsey cases in particular the more specific you are and clear about the why the better your structure will be percieved. I like the level of detail you have.

One point to note - be very careful about cost synergies and revenue synergies. Sales best practices is usually revenue related so do not talk about it under cost, you will lose points for that.

Best,

Udayan

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Antonello
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replied on Apr 08, 2021
McKinsey | MBA professor for consulting interviews

Hi, I would present them with a top-down way, identifying 3 main areas to group every bullet

Best,
Antonello

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Francesco gave the best answer

Francesco

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