Synergies

While cost-cutting is often the focus, research shows that only 30% of synergies come from cost reductions, while 70% are revenue synergies like cross-selling and market expansion. Revenue synergies, though harder to quantify and execute, often drive higher long-term value than initial cost savings. For example, McKinsey found that companies focusing on revenue synergies achieve 1.5x higher total shareholder return (TSR) compared to those focusing solely on cost synergies.

In M&A, leveraging cross-selling and up-selling opportunities can significantly increase post-deal revenues. Companies with strong cross-selling capabilities achieve 10-20% higher revenue growth post-acquisition, according to Bain & Company. Yet, less than 50% of companies actively plan for cross-sell or up-sell opportunities during diligence, missing a huge revenue growth lever.

Surprisingly, studies show that over 60% of expected synergies are never fully realized, according to a study by Deloitte. Misalignment in execution and cultural fit are the primary reasons why expected synergies fall short. This suggests the need for stronger synergy tracking mechanisms post-acquisition to ensure the targeted outcomes are achieved, and value isn’t left on the table.

A 2021 PwC study found that deals with a clear technology synergy component outperform others by 30% in long-term value creation. By integrating digital capabilities, data assets, or leveraging shared platforms, companies not only realize cost efficiencies but unlock new market opportunities and innovation. This highlights the increasing importance of technology in realizing post-deal synergies beyond traditional operational efficiencies.

While financial and operational synergies get the most attention, cultural synergies often determine the long-term success of an acquisition. A study by Aon found that 50-70% of failed acquisitions can be attributed to cultural misalignment. Firms that prioritize cultural integration as part of their synergy strategy experience 35% higher employee retention and 20% faster post-merger performance improvements.