The process of acquisitions and mergers (M&A) is usually undertaken with the hope of achieving some degree of growth. However, a lot of this growth focuses on revenue synergies. These synergies are the additional revenue streams that are expected when companies use their strengths through merging. Unfortunately, capturing these synergies poses a more significant challenge than initially thought.
This blog will outline four propositions that companies ought to balance if they are to make the most of revenue synergies while integrating. With the related best practices deployed by corporate strategy advisory specialists, we take you through the passion goals of your M&A.
- Clearly Define Revenue Synergies
One of the main issues responsible for most companies’ failure to realize revenue sharing potential is absence of adequate definitions at the beginning. It is important to explain plainly what revenue garnering synergies are and what they aren’t. For instance, in this case, it is important to distinguish what entails organic growth from that which directly comes from the merger.
Taking Action:
- Structure Synergies: Synergies can be classified into these three:
- First-order synergies: These are related to the core competencies of the business and can be easily measured.
- Second-order synergies: Auxiliary factors, like improving access to or retention of existing customers.
- Third-order synergies: Are the ones that how the companies are operated and how value is created develop new and revolutionizing change in both companies.
- Limitations Should Be Set Respectively: Calibrate synergies by focusing their definitions succinctly on the needed performance impact concerning financial outcomes.
- ‘Link Revenue Synergies to Specific’ Selling Goals
In the sales hierarchy, revenue synergies should be wholeheartedly included to avoid doing them in an afterthought manner. These synergies should be incorporated into sales planning and performance measuring systems.
Actionable Steps:
- Monthly Targets: A strategic advisor can set well-defined monthly projections to achieve per-month cross-sold product–focused performance tracking.
- Performance Incentives: Penalty or incentive programs need to be adapted to pull in the leadership and sales teams towards synergy efforts.
- Internal Communication: Use key defense wins to boost internal morale and convince the synergies that their targeted benefits would aid them through tough integration.
- Synergy Assessment to Revenue Performance
They must be assessed if they impact positively up to the top or down the bottom if any revenue synergies are to deliver the required impact. There is value in tracking individual initiatives, however, it must be done in a broad-based sense.
Actionable Steps:
- Holistic Measurement: Affirm to defeat P&L the reconciliation of realized revenue synergy from P&L and that attributed to the firm’s revenues.
- Avoid Pitfalls: Make sure that the endeavour to succeed in the synergies does not cause gridlock of the core business processes and eventually cause poor performance overall.
- Engage in a Customer-Centric Approach and Identify Potential Areas of Business Integration
To successfully achieve revenue the companies concerned should know their customers well. In this case, a strategic advisor can help in addressing the critical questions related to customer demand, potential market, and sales cycles for proper shaping of the synergies.
Course of Action:
- Customer Profiling: Compare and contrast the variations and segmentation of customer needs, buying centers, and channel access when two companies merge.
- Innovation Speed: Determine how quickly new value will be delivered to customers and how this can fit in with the newly merged company.
- Leverage Best Practices: Seek factors or activities that enhance the chances of accessing and retaining customers, and which can be imitated within the new entity.
Conclusion
Achieving revenue synergies in mergers and acquisitions is an uphill task that requires planning, hard work, and getting the right counsel. Identifying important synergies, implementing those immediate sales targets that can be measured, and most importantly knowing your customer inside out has potential for providing outsized returns. Following these imperatives enables corporations to reap all the possible benefits of the merger and maintain growth over time.
