Revenue Synergies: The Key to M&A Success

Mergers and acquisitions often fail to achieve the projected benefits. Even when a deal is deemed an integration success, most companies are unable to fully achieve their synergy targets. Although plenty of playbooks have been developed on the success factors for capturing cost synergies (which are relatively easy to achieve), there is little focus on deliberately planning for revenue synergies. These are more challenging, but are also a worthy pursuit that can deliver up to 35 percent of the total synergy target.

Topline synergies are much more powerful than cost synergies and represent the largest opportunity for management and deal teams. Our example in figure 1 shows how Company A would have to reduce its fixed costs by at least 16% to achieve the same margin impact of a 3% price increase. The math speaks for itself: revenue levers (particularly prices) are much more effective and abundant. You can only remove so many costs from your business before…