Synergies between big company and startup

Question

Hi, what could be the synergies between a big company and a Tech start-up? for instance GM acquiring a start-up that produces softwares for autonomous vehicles.

How would you structure your answer ?

Thank you

Answer 1

Hi there,

In general, I like to break down synergies into Revenue uplift and Cost reduction.

Non-exhaustive examples include:

Revenue Uplift

Charge higher prices
- Seller power
- Analytics allowing better price targeting
Sell more of x product
- Cross-sell to customers
- Product bundling

Cost Reduction

Reduced Fixed costs
- Merged IT systems/costs
- Merged back-office functions
  - Legal
  - HR
  - Finance
Reduced Variable Costs
- Buyer power
  - For raw materials
  - For labor
  - For contracts
- Economies of scale

For your GM acquiring Cruise example, well, this is obvious! GM has the brawn i.e. manufacturing/mass-production know-how. Cruise has the brains i.e. the AV R&D/Tech.

As such, GM can pour capital into Cruise, let them do their thing, but constantly coordinate and communicate to translate the tech into actual cars/production techniques.

Tesla is a do-it-all-yourself company. GM has to buy Cruise to compete.

Answer 2

Hello!

It would totally depend on the type of companies, what they do, where they have allocated most of their workfoce (if any), the type of synrgies generated...

Can you give a bit more detail, or even better, give it a shot and publish it here later on so we can help you polish?

Cheers,

Clara

Answer 3

Have a look at this thread for related ideas

https://www.preplounge.com/en/consulting-forum/ma-synergies-9877

Answer 4

Hi Anonymous, I would always start with a theoretical approach before the actual analysis of the income statement.... (read entire answer)

Hi Anonymous, I would always start with a theoretical approach before the actual analysis of the income statement. A potential structure could be the following: Revenue syne... (read entire answer)

Answer 5

Hi, Yes, definitely. It will be part of the cost synergies. For Synergies Calculation you can use the following s... (read entire answer)

Hi, Yes, definitely. It will be part of the cost synergies. For Synergies Calculation you can use the following structure: Revenue synergies - here you calculate the syn... (read entire answer)

Answer 6

Hello! Precisely for the high amount of questions (1) asked by my coachees and students and (2) present in this Q&A,... (read entire answer)

Hello! Precisely for the high amount of questions (1) asked by my coachees and students and (2) present in this Q&A, I created the “Math & Formulas - Economic and Financial conc... (read entire answer)