Revenue synergies are often the reason for companies doing acquisitions. However, unlike cost synergies that happen instantly, they are more difficult to achieve and often go unrealized. One of the biggest problems in M&A is that when a company pursues a deal, different departments have varying perspectives on what's essential. This results in massive value leaks in the deal rationale. In this article, Chris Von Bogdandy, Global Lead M&A Solutions at Slalom, discusses his framework for realizing revenue synergies in M&A.
“Our (IMO) job is not to create a perfect solution that will run forever. Our job is to get to the synergies and to stay focused on the synergies.” - Chris Von Bogdandy
A survey of around 150 companies was conducted about their deal objectives, specifically on realizing revenue synergies. Surprisingly, almost half (48%) admitted they had lost track of their revenue synergy goals. This is why Chris developed a framework that translates the deal thesis into a synergy model, so that everyone will understand the key drivers for synergies. They break the deal thesis down into 4 buckets:
From here, they break it further down into activities and milestones that they have to hit to unlock those synergies.
The first step to realizing revenue synergies is understanding the customer journey of both companies. The best way to do this is to spend time with customers directly. However, there are regulatory issues that might limit this, so firms can use third-party services, like a "clean team", to understand customer perspectives.
The clean team must evaluate services as if they were the customer and examine online feedback and technology references. Through this, companies can discover varied approaches to selling products or services. After this, Chris focuses on 3 things:
Despite a company's success with its method, it's essential to recognize that other firms might have different yet effective techniques. After finalizing a deal, revisit the initial agreement and synergies to assess progress and identify areas for improvement.
This "deal thesis refresh" should happen about three months post-deal. The first 100 days after closing a deal are crucial, not just for integration but to ensure the alignment of the deal's original objectives. Focus on these synergies and objectives rather than just on completing the integration process.