Realizing Revenue Synergies

M&A Integration Insights

Corporate Finance & Restructuring

August 19, 2016

Leverage Synergy

Revenue synergies are often considered to be the most elusive aspect of merger and acquisition (“M&A”) transactions. Even disciplined serial acquirers have acknowledged that while they typically meet or exceed cost synergy targets, a smaller fraction of their deals can claim to achieve expected revenue synergies.

Senior executives are often reluctant to include aggressive revenue synergies in valuation, which is typically attributable to low confidence in estimating, capturing or executing synergies that are dependent on external/market factors. We have found that developing a standard framework for revenue synergies, grading synergy opportunities, risk-adjusting uncertainties and market conditions can lead to quick hits and minimize execution risks.

Revenue synergies are also dependent on variables requiring new skills, methods, products or services, channels or even a new customer value proposition. Entrenched in these attributes are external factors, such as competitor responses, customer adoption of the product, pricing and mechanics of the deal itself. 

The number of functions involved in delivering a revenue synergy, such as cross-selling of products, is complex and requires involvement from sales, marketing, service, products, customer experience and pricing, thereby breaking down the conventional logic centered around functional integration successful in delivering cost synergies.

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