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| Network Strategy |
| If you have been tasked with finding the synergies that justified your merger - give us a call.
Better still, contact us before the decision to merge or acquire has been made.
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| Rapidly finding supply chain synergies is often the key to making mergers and acquisitions work.
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The viability of a hefty percentage of mergers/acquisitions comes down to a simple expectation - that when the businesses are brought together, the new business will enjoy all the revenues but not all of the costs of the previous businesses - in other words, there will be synergy benefits.
You get synergies by combining operations such that the cost of the whole is less than the sum of the parts. This entails analyzing cost drivers and the way they impact cost.
Costs drivers are pretty straightforward. They usually include volume (throughput), crewing, shift patterns, number of sites, number and type of lines and so on.
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The difficulty comes in assessing how these drivers actually impact cost.
In factories, and sometimes in distribution, costs behave in one of three ways:
- They are absolutely fixed - whatever the volume, you need a factory manager, with a pension, PA and car;
- They are fully variable - you only buy the packaging materials which you actually need;
- They are somewhere in between.
We call the last category semi-variable. These are tricky but vital. The rump of synergy benefits come from semi-variable costs; truly fixed costs are rarely more than £1 million per site, which doesn't pay for much in the way of rationalisation; truly variable costs move with volume and you are probably stuck with them.
So if it's synergy savings you're after, semi-variable costs is where you look.
We use detailed, customised, bottom up cost models - which provide the most accurate representation of complex cost movements in the industry.
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