Hi, what could be the synergies between a big company and a Tech start-up? for instance GM acquiring a start-up that produces softwares for autonomous vehicles.
How would you structure your answer ?
Thank you
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Synergies between big company and startup
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Hi there,
In general, I like to break down synergies into Revenue uplift and Cost reduction.
Non-exhaustive examples include:
Revenue Uplift
- Charge higher prices
- Seller power
- Analytics allowing better price targeting
- Sell more of x product
- Cross-sell to customers
- Product bundling
Cost Reduction
- Reduced Fixed costs
- Merged IT systems/costs
- Merged back-office functions
- Legal
- HR
- Finance
- Reduced Variable Costs
- Buyer power
- For raw materials
- For labor
- For contracts
- Economies of scale
- Buyer power
For your GM acquiring Cruise example, well, this is obvious! GM has the brawn i.e. manufacturing/mass-production know-how. Cruise has the brains i.e. the AV R&D/Tech.
As such, GM can pour capital into Cruise, let them do their thing, but constantly coordinate and communicate to translate the tech into actual cars/production techniques.
Tesla is a do-it-all-yourself company. GM has to buy Cruise to compete.
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Hello!
It would totally depend on the type of companies, what they do, where they have allocated most of their workfoce (if any), the type of synrgies generated...
Can you give a bit more detail, or even better, give it a shot and publish it here later on so we can help you polish?
Cheers,
Clara
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Have a look at this thread for related ideas
- https://www.preplounge.com/en/consulting-forum/ma-synergies-9877
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In cost reduction, are economies of scale and buyer power the same thing? We may have more raw materials we can buy and that would give us economies of scale?