Why do companies struggle with revenue synergies?

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  • #35722
    Anirvan Sen
    Participant

    Many companies strategically acquire other companies with the primary intent of increasing their revenue. The belief is that the acquiring company should be able to cross-sell to customers of acquired company and vice-versa. And yet, once the company is acquired and the deal is closed, the leadership teams seem to run out of ideas on how to create a revenue generation plan of combined businesses.

    #39058
    Craig Hasler
    Participant

    Hi Anirvan,

    Thanks for the prompt.

    Typically revenue synergies are easiest to obtain when a large multinational corporation is acquiring a much smaller company where they can expand the reach and utilize existing channels to sell more of the acquired solution. For companies that are similar in size and the strategy involves around providing full stack “solutions” instead of “products”, revenue synergies can be planned but in reality are much tougher to execute on. I think revenue synergy planning is an extremely important area to focus on during the due diligence phase as performance in this area can make or break the performance of the overall acquisition (cost synergies are much more well-known).

    Interested to hear comments/thoughts from others.

    Craig

    #39068

    I agree on the attention to be paid during the Due Diligence Phase about the actual revenue synergy potential. When reading the DD report, at times what I capture from it is the aspirational revenue synergies wanted by the business and nothing really grounded.

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