Capturing and Monitoring Synergies
Identifying Key Performance Metrics
In order to capture synergies effectively, synergies need to be mapped out from the start then monitoring needs to be assigned along the way. It is ideal for those that are responsible for achieving the synergy also play a direct role in identifying and valuating these synergies. Synergy assignments and early buy-in should be promoted by business units.
The rate of on-time personnel departures, or employees of the acquisition target who leave when they are expected to ,product bundling as well as personnel and non-personnel cost reductions are some of the considerations with key performance metrics.
The transaction can also serve as a motivation to make operational improvements more of a priority. Another considerable value source is procurement. Price reductions and volume discounts are quite common. More compelling value is often found in contract compliance, product standardization and demand management.
One of the more essential parts of the monitoring process is obviously the attention to detail. For instance, one company might seem to have a top line performance indicators and shown strong performance of a recently acquired asset. Then upon closer investigation, it was shown that the performance was due to an unforeseen synergy, while the performance against project synergies was far behind what was expected.
Considering this example we can clearly see that if the company did not known where value was being created or destroyed.
In conclusion we feel that all to often companies are overly formulaic in managing deal synergies. If all deals are forced through the same or similar tests and reviews, regardless of their size, often results in an over commitment of time and resources.
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