Synergies

This topic contains 6 replies, has 7 voices, and was last updated by  Vijay Dravid 2 months ago.

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  • #115909

    Kai Jie
    Participant

    Should a particular group of synergies be prioritized in evaluation over another, or are they all equally important?

    #115980

    Beckie Callahan
    Participant

    I need more context about the deal rationale as I expect some patterns and trends may be identified. I would bet on a prioritization of synergies over treating them as equally important. What are the needs of the acquiring company and why does the management believe the transaction will be valuable? The leadership or steering committee should be able to set priorities and key expectations.

    I’m guessing that a group of synergies would include broad categories, such as revenue generating or cost cutting synergies? Or are your groupings more narrowly defined – like HR -acquiring talent for R&D? Some synergies might be industry specific, like a case of industry consolidation. Considering that each transaction is unique, then synergies are likely to be varied as well. Some might be business critical whereas others are only ‘nice to have.’

    #116001

    Poon Henry
    Participant

    Each deal has its own objective and thus the synergy effect will be different. It depends.

    #116209


    Participant

    I agree with the last post it all depend. What is critical, though, is that management has an understanding of the synergies or the why. It should be crystal clear why the acquisition is done. To say: Oh, we will have synergies…blah blah blah – will not work. We will synergies because we only need one of the two sales teams, etc.

    #116626

    Thomas Teltscher
    Participant

    I would think this very much depends on the business we are talking about; also I agree with Becky that the original deal rationale will drive this as well. Acquiring a turnaround case in manufacturing will have a different synergy focus than a market extension case in a service-driven industry. I suppose what is always true is that combining the know-how of both sides and making people work together is a key source for value creation

    #116954


    Participant

    I think it really depends, case by case basis. Ultimately, the acquiring company needs to decide on the key/critical/must-have synergies that they are willing to pay for in the acquisition.

    #116997

    Vijay Dravid
    Participant

    This will really depend on what the rationale for the deal is in the first place. if the focus was on growth, i would look to drive the revenue synergies first before looking at other opportunities. Some deals are driven based on cost synergies and therefore those become the focus early on in such deals.

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