Introduction
I’ve been in consulting for over a decade. Most of this time has been spent working on supporting mergers & acquisition deals in typically three capacities:
- Due Diligence
- Post-Merger Integration and Separation
- Performance Improvement
In a prior article (see link: https://medium.com/@crcjeffkim/m-a-synergies-an-overview-on-basic-concepts-part-1-of-2-45396f1f6540), I layed out a basic framework for thinking about mergers, acquisitions and synergies.
Synergies in its simplest explanation is: 1 + 1 = 3.
If I buy a company, and intend to combine it with another company that I own, I should be able to derive value from either:
- Reducing costs or;
- Increasing revenues (in my experience this one tends to be the hardest to quantify)
This article will discuss what I learned about synergies after reviewing the 5 largest deals I have ever worked on — with a combined deal value of over $10 billion.
Consumer Retail, Technology & Media, and Aerospace & Defense
Recalling and dissecting 30+ transactions was no small task. It took dozens of hours to piece together the deals i have worked on. Let’s just say Pitchbook is a great resource. After I had exhausted my look-back, I created a master rollodex. I filtered for the top 5 by deal value — again, totaling $10 billion (B)+
What I learned was these deals all landed in three industries:
- Consumer Retail;
- Technology & Media;
- Aerospace & Defense.
Synergies as a percentage of deal value
Synergies were 8% — $820 million (M) — when measured as a percentage of the total deal value, $10B+. I looked at the breakdown by industry and here’s how they ranked — in descending order with highest first:
- Technology & Media: 9% (synergy as a percentage of total deal value);
- Aerospace & Defense: 6%;
- Consumer Retail: 5%.
Of course the next question I asked was how did this compare when looking at the total deal value by industry segment? This will have to wait until my next article.
