Where to find cost synergies when merging operations

Additional profits through cost reduction is a reason often given for company mergers. Frequently the cost reductions do not fully materialise as a result of inertia, resistance to change or because they were over estimated. For most companies, the key areas to look at and carefully evaluate are listed below. Implementing or initiating the cost reductions is a key task in the first 100 days post merger.

  1. Central administrative and management overhead reduction. Smaller management team, fewer support staff, more productive back office functions
  2. Reduced or more efficient manufacturing or production capacity - how will this be achieved in practise?
  3. Improved purchasing power - but only if you have good negotiators with strong market understanding
  4. Shared (or more productive) research and development resources - will they work well together?
  5. Marketing cost reduction - but difficult to achieve in the short term if the customers of the two organisations have been handled in different ways historically
  6. Sales costs - more efficient use of the sales team and sales processes
  7. Distribution costs

With thanks to Professor Scot Moeller of Cass Business School. For an impartial assessment of your proposed transaction or help with implementing the changes post merger, contact Paul Chapman on 0207 100 1233 or paul.chapman@azurepartners.co.uk