We have developed a comprehensive framework of 12 top-line synergies and 12 dis-synergies associated with M&A transactions across eight major categories. This overview describes each one and presents a number of data analytics techniques that will help you take advantage of top-line potential and mitigate downside risks during integrations.

Four core functions of banking

1. Cross-selling

The potential to cross-sell products is perhaps the best known and most obvious opportunity to grow the top line after a deal closes.

  • Cross-selling an extended range. Newco takes one party’s products and sells to customers of the other party following the integration.

  • Bundling. Newco combines complementary products from the two formerly separate companies to create more compelling customer offers.

  • Cross-selling through different routes to market. Each of the former entities boosts sales volumes by expanding into one another's sales channels. Works best when companies have complementary products and customer bases, but use distinct channels or have distinct channel strengths.

Our approach. We harness the power of data—including channel and sales transaction data where appropriate—to derive insights about product features, customer behaviors, and purchasing patterns. Propensity modeling is another important analytical tool that we use. It combines data from a variety of sources to predict the likelihood that visitors, leads, and customers will behave in certain ways. It can be used to predict whether different customer groups will respond favorably to marketing action, to new bundled offers, sales channels, and so on.

2. Game-changing strategy

Game-changing strategy opportunities take several different forms, for example:

  • Marketing uplift. Two entities share insights to enhance power and effectiveness of newco’s marketing, allowing it to reach a wider customer base with more targeted efforts.

  • Sharing or combining R&D and technologies. Newco creates technology that leapfrogs what either company could do on its own, thereby accelerating speed to market.

  • Game-changer strategic direction. Newco combines market and competitive insights plus institutional knowledge to uncover previously unknown synergies that can shape a new path to growth.

Our approach. We apply analytics tools to mine for insights in marketing data, optimize promotional spend, and identify opportunities to exploit each party’s R&D.

3. Pricing and margin

Post-merger opportunities exist to lift margins, but they are often countered by price-levelling and pressure from customers to share synergy cost benefits.

  • Pricing and margin enhancements. The combined entity compares price points of similar products and “harmonizes up” to the higher price point. Most effective when the newly combined company has increased pricing power and can therefore achieve pricing and margin enhancements with minimal volume erosion.

  • Margin pressure. When the two combining entities have comparable products that they are selling to the same customers at different price points, customers may exert pressure to enforce lower prices.

  • Customer pressure to reduce prices. Strongly positioned customers may see the combined entity's synergy savings and request—or demand—that a portion be passed on to them in the form of price reductions.

Our approach. It’s important to know in advance whether you are at risk of customers demanding price concessions. That way you can get ahead of the conversation and prepare for a dialogue with your customers. We help newcos stay on top of this risk in a variety of ways. For example, we analyze the customer base and their willingness to pay and pair this with advanced pricing analytics. We also use text mining to analyze contract and sales data, which allows us to uncover specific risks, such as situations where volume rebates may trigger loss of revenues.

4. Customer gains and losses

Staying focused on customers is essential at the time of an acquisition. Opportunities to increase customer loyalty are sometimes offset by greater customer churn or volume loss, so staying vigilant is crucial.

  • Increased customer loyalty. Newco is able to deepen customer relationships by creating more reasons for customers to stick to its brands after the deal. With its wider data pool and better customer insights newco can create enhanced loyalty programs and more attractive product or service bundling.

  • Increased customer churn. Customers leave, especially when there are changes in the sales team. This period of transition can also be an optimal time for competitors to actively poach customers.

  • Customer or volume loss. Newco becomes the sole supplier to certain customers, or customers become concerned that they have too great a reliance on newco. This prompts them to move volume to other suppliers in order to reduce real or perceived supply risk.

Our approach. We use a variety of analytical techniques to mitigate customer and volume loss. For instance, propensity modeling can identify customers with a high likelihood of attrition, while predictive modeling of customer behavior helps determine which customers are most likely to diversify their post-merger spend.

5. Strategic partners

Acquisitions can be a time of significant change. Some of this may be internally driven, while some may be the result of actions taken by strategic partners or competitors.

  • Volume insourcing. Newco brings volume in-house when one of the two merging companies produces a product that the other currently buys from a third party.

  • Trimming of customer lists. Newco scrutinizes both parties’ customer bases to determine true profitability, letting go of certain legacy customers with higher cost to serve, to free up capacity for insourcing.

  • Competitor response. Competitors go beyond poaching to battle for customers in more strategic ways, including instigating a price war, offer matching, forming their own consortia, or even acquiring a strategic competitor.

Our approach. Analytically driven approaches that can help maximize outcomes for a newly combined company include insourcing cost-benefit analysis, cost-to-serve analysis, and competitive war-gaming.

6. Operating model

Integrations are an ideal time for companies to review elements of their operating model and identify opportunities for renewal. At the same time, changes to the operating model may cause disruptions that can erode the top line.

  • Customer experience redesign. Newco improves customer-facing processes and structures in light of its joint capabilities and future business model.

  • System or process disruptions. The process of integrating two legacy systems results in loss of important customer data, negatively affecting customer service. System bottlenecks hamper newco’s ability to derive insights from its combined data, leading to less-informed decision-making.

  • Loss of vital employees. Uncertainty of transition prompts employees to leave the organization. When these are important employees, especially salespeople, the result can be customer disruption and attrition.

Our approach. We use analytics to test and iterate new customer experience options, as well as to create and test new systems and processes in order to prevent disruptions. HR analytics can help predict which employees are likely to leave, allowing newco to implement retention strategies for vital staff.

7. Brand

Brands face a litmus test during integrations. Newcos can experience either brand uplift or brand erosion depending on how they handle the transition.

  • Brand boost. One company’s brand or brands are notably more impactful in the market, creating a halo effect that increases brand equity across the combined business.

  • Brand value conflicts. Customers perceive a conflict or disconnect in the values of the combining companies, leading to loss of sales.

  • Brand equity loss. Customers perceive a negative impact overall from the merger, weakening both companies’ brands.

Our approach. Various analytics tools help us understand and predict how customers respond to brands. Sentiment analysis employs advanced modeling techniques to uncover brand perceptions from web-based consumer commentary. Conjoint analysis helps us tease out the “worth” of each brand for equivalent products.

8. “Eye on the ball”

Integrations are done for a reason: combining two organizations offers a range of strategic advantages from a melding of technologies to increasing market leverage. It’s important not to lose sight of these objectives.

  • Technology and R&D advantages. Newco accelerates innovation and time to market by sharing technology and R&D capabilities across the combined organization.

  • Loss of customer focus. Newco, consumed by nuts and bolts of the transaction, becomes too inwardly focused; customer service suffers, leading to customer attrition.

  • Culture clash. The combining entities have starkly different cultures, leading to integration speedbumps, including employee attrition, internal squabbling, and in the worst cases, failure to complete an effective integration.

Our approach. Keeping an eye on the customer can benefit from an analytics assist. We build data visualization dashboards to help companies monitor KPIs in real time so they can take timely action if problems occur. Cultural assessments will flag culture clash problems early before they can snowball and gap analysis and planning lead to action plans for resolving differences.

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