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revenue synergies

business acumen
New answer on Nov 08, 2021
5 Answers
1.0 k Views
Anonymous A asked on Nov 07, 2021

I find it hard to think about synergies. If I’m thinking about revenue synergies through increasing Avg price per customer or # of customers, what are some general ways I can have this?

 

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Sidi
Expert
replied on Nov 07, 2021
McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers

Hi!

Increasing avg price per se is not a synergy. 

A synergy merges on the ground of common usage of tangible or intangible assets/resources which have complimentary features. For example, if two companies merge, one has a fantastic product portfolio but no established sales expertise, while the other has great sales processes, but dusty products, then the merger might result in significant revenue synergies if the great products get pushed into the market via state of the art sales processes and channels.

Such complimentarities can emerge in EVERY sub driver of profit. So yes, there could also be pricing synergies, if for example through a merger the brand power of the seller increases and thereby the willingness to pay of potential customers.

Cheers, Sidi

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Anonymous B on Nov 07, 2021

would increasing avg price be a synergy if you hypothesize that they could now do 1) dynamic pricing (assuming more sales volume post merger, so now can invest in such capabilities) 2) have specialized skills post merger they can charge for 3) provide personalized customer support with greater support/sales staff..all of which could potentially justify a higher price increase?

Pedro
Expert
replied on Nov 08, 2021
Bain | Roland Berger | EY-Parthenon | Mentoring Approach | 30% off first 10 sessions in May| Market Sizing | DARDEN MBA

In revenue, it's mostly about one company leveraging the other company's assets or capabilities. Examples:

  1. Selling my products to their customers (x-selling)
  2. Selling my products in new geographies or channels
  3. Access to their IP in order to improve my products
  4. Creating more competitive offerings (bundling)

Regarding cost… it's usually by having scale effects (e.g. purchase cheaper because of increased market power), by adopting “internal” best practices (e.g. better procurement, better producing processes) or by eliminating redundancies (e.g. shared services, duplicated sales teams, duplicated IT systems, etc.).

So to increase “average price”, you might be able to upsell the other company's products. You increase number of customers if you use the other company's market or channel presence, or even customer base to sell your own products.

Hope this helps,
Pedro

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Agrim
Expert
Content Creator
replied on Nov 07, 2021
BCG Dubai Project Leader | Learn to think like a Consultant | Free personalised prep plan | 6+ years in Consulting

Synergies mean 2 + 2 = 5

They can impact revenue, price, volume, costs - anything.

An example: Merger of 2 petchem facilities located close to each other in the same industrial cluster

Some of the synergies:

  • Cost: Economies of scale through better procurement
  • Cost: Economies of scale through sharing of inputs (material, staff, equipment, facilities etc.)
  • Revenue: Improving product quality through knowledge sharing and hence increasing pricing and/or volume
  • Revenue: Additional customers due to improved value proposition (in addition to the combined customer base)
  • …and more
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Ian
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Content Creator
updated an answer on Nov 07, 2021
#1 BCG coach | MBB | Tier 2 | Digital, Tech, Platinion | 100% personal success rate (8/8) | 95% candidate success rate

Hmmm, I think you need to take a step back here.

Synergies are where company A adds something to company B or vice-versa.

Your sentence doesn't really make sense at all in the context of synergies.

There are a lot of Q&As on this already so I suggest you read through some of them for examples :)

https://www.preplounge.com/en/consulting-forum/synergies-between-big-company-and-startup-10332

https://www.preplounge.com/en/consulting-forum/quantifycalculate-synergies-formulae-11710

https://www.preplounge.com/en/consulting-forum/cost-vs-revenue-synergies-10669

(edited)

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Antonello
Expert
Content Creator
replied on Nov 07, 2021
McKinsey | NASA | top 10 FT MBA professor for consulting interviews | 6+ years of coaching

Hi!

There are multiple sources of revenue synergies besides the ones you mentioned. They might come from increased company dimension, brand reputation, bigger client portfolio or product mix, etc.

Hope this helps.

Best,

Anto

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Sidi gave the best answer

Sidi

McKinsey Senior EM & BCG Consultant | Interviewer at McK & BCG for 7 years | Coached 350+ candidates secure MBB offers
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