Six Tips for Achieving Post-Merger Synergies

Many mergers fail to achieve their target synergies on time, resulting in diminished returns, disappointed shareholders and depressed value. But following six essential steps can help companies aim higher, achieve more, and realize their cost and revenue synergies more swiftly, says a recent article from the Boston Consulting Group.

• Link due diligence and integration teams.Consider involving business unit heads—those charged with implementing the plans—in setting synergy targets at the due diligence stage, and include a member of the due diligence team on the integration team to help ensure continuity and accountability.

• Utilize clean teams. A clean team is an independent group that collects and analyzes sensitive company data before the merger close, allowing the acquiring company to eliminate blind spots and get a sharper picture of the target company without violating antitrust regulations or confidentiality agreements.

• Establish stretch targets. Challenge integration teams to stretch their thinking to explore what can be achieved in the future. Triangulation allows companies to see how much stretch is reasonable using multiple data sources, including industry peer data, previous integrations, functional experts, synergy benchmarks and scale curves.

• Rapidly iterate to set targets. The “W” approach combines top-down stretch target setting with two rounds of bottom-up validation that enable progressively greater degrees of accuracy and detail. All levels of management with a role in integration are involved in target setting, while validation is done by those responsible for delivering results.

• Diligently pursue revenue synergies.Revenue synergies are the gap between additional revenues earned as a result of the merger and baseline revenues the company would expect to earn anyway. Ask integration teams to identify revenue synergies as well as concrete initiatives for achieving them.

• Track performance. Create a synergy road map and milestones for each integration project. All synergies and integration costs should be monitored on a monthly basis for the first 24 months to allow for swift recovery if a project veers off track; quarterly tracking is sufficient thereafter.

See the full article, “Six Essentials for Achieving Postmerger Synergies.”

Related article: All M&A Deals Have Culture Divides to Address: BCG Report