![]() While layoffs are not always part of mergers and acquisitions, they are associated with the combining of two companies as most companies do not need two of each C-suite position and some staff positions. Similarly, increasing the acquirer’s access to new research and development can allow for advancements in production that yield cost savings. Increased marketing channels and resources may result in reduced costs. Generally, merger of two companies can create cost-savings due to: Achieving these synergies tends to be easier on paper than in practice. The two merging companies will be left with excess resources after the transaction - for example, two HR departments - which can be reduced with the aim of generating cost synergies. If revenue synergies can be considered to be value added at the front-end, cost synergies might well be considered value added in the back office. ![]() Pixar’s characters could be promoted through Disney’s theme parks, giving enhanced exposure and sales opportunities to Pixar’s output.Merchandise featuring Pixar’s characters, which included children’s favourites like Buzz Lightyear, could be sold through hundreds of Disney stores globally.Disney’s scale enabled Pixar to release its extremely popular motion pictures more regularly and through an expanded distribution network.Some of the revenue synergies that the deal brought include: ![]() By 2011, it had grown over 20% to $40.89 billion.īy contrast, the S&P 500 shrunk 1% over the same period. In 2006, the company had revenues of $33.75 billion. There can be multiple examples of revenue synergies in M&A, but traditionally, revenue synergies result from:ĭisney’s acquisition of Pixar in 2006 is often cited as an example of value generating M&A, and with good reason.The deal made sense on a lot of levels, creating a series of revenue synergies that added billions of dollars in value to the Walt Disney Company stock price. More specifically, McKinsey & Company notes challenges, such as developing appropriate targets and executing new workflow and sales strategies across all functions, make revenue synergies more difficult to capture. It should be noted, however, the research shows that capturing revenue synergies takes, on average, a few years longer than capturing cost synergies. Revenue synergy is based on the premise that the two companies combined can generate higher sales than the sum of their individual sales. For example, the merger of two consumer goods producers could bring revenue synergies through a complementary product range and cost synergies through savings in warehousing and distribution.īelow, we listed an example for each type of synergy.
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