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