Synergy Management

Abstract

Synergies are the holy grail of any transaction, as they define, together with the transaction premium paid, the value generated by an M&A initiative. Surprisingly, the concept of synergies is still a very vague concept. Synergies will be in the following understood as the net present value of additional Free Cash Flows created by a transaction which goes beyond the standalone values of the acquirer and the target. In essence, synergies are a surplus concept. The key target of the Synergy Management along all the primary modules of the E2E M&A Process Design is to capture these synergies. Therefore, Synergy Management by itself is an End-to-End process, which supports any of the primary M&A processes: Within the Embedded M&A Strategy, the Synergy Management has to identify (Synergy Diagnostics) and map the portfolio of potential sources of synergies (Synergy Pattern) by the combination of the acquirer’s and the target’s SBDs. Besides, a Blue Print how those synergies could be scaled (Synergy Scaling Approach) within a JBD has to be drafted. Additionally, a first rough valuation, timing and evaluation of the likelihood of the synergies are paramount at this early stage, as the synergies and the standalone value of the target define the upper boundary of any indicative purchase offer. The identified synergies have to be verified by the Transaction Management, as the transaction value add is based on “real $” and not “power point $”. The Due Diligence serves as a proof-of-concept of the Synergy Pattern and the Blue Print of the Synergy Scaling Approach. Applying the 10C JBD, the early synergy estimates could be broken down into detailed synergy levers. These more detailed synergy values have then to be feed-back into the update of the valuation. Finally, Synergy Management is a centerpiece of the Integration Management. This holds especially true as the premium is paid already at closing, but the synergies have to be captured within the integration process. For any transactional value-added and integration success the synergy realization, tracking and controlling is therefore of essence. Additionally, a feedback loop and learning ecosystem for the optimization of the Synergy Management is part of a long-term M&A capability approach.