Unlocking the Full Value of a Consolidation Merger
Find out how BCG supported an industrial goods client to realize full value from a consolidation merger.
AmerigCo was a large industrial goods manufacturer headquartered in North America and earning high cash flows from strong positions in low-growth markets. The client acquired the second-leading player in a consolidation effort to further strengthen the market position of its world-market-leading business unit.
BCG, as a longtime strategic advisor to the company, was involved in the deal preparation and execution and was asked for external advice and support in postmerger integration. The goal was to have a quick integration, capturing the targeted cost synergies and retaining key talent.
Major challenges included the large target size, a significant customer overlap, and the client's aspiration to have a "best of breed" talent selection process.
According to the strategic logic of the merger, the levers most relevant to value creation were identified and put at the core of the integration efforts:
Operational excellence and quality were of major importance to realize the targeted synergies.
Rigorous customer focus was especially important given the large overlap in the customer base. Deterioration in the customer base would quickly wipe out the cost synergies and therefore needed to be controlled tightly.
Retaining talent and key capabilities was seen as the most important asset for future growth and was made one of the top priorities.
BCG recommended and implemented a PMI agenda that effectively targeted the three key value levers:
Operational excellence and quality were fostered through a rigorous synergy process. Specific growth and synergy targets helped spot synergies on top of those identified in due diligence. Stringent tracking and monitoring processes ensured full realization.
Rigorous customer focus, supported by a customer pulse check, enabled us to spot and solve potential issues in time. Clearly defined measures ensured that the relevant issues were tackled before they had adverse effects on performance.
Key talent was identified quickly, and staffing of the new organization was executed in a transparent and well-structured process. That helped to retain key employees while being accepted as transparent and fair.
BCG helped the client not only to deliver ahead of schedule but also to realize additional synergies—exceeding the total amount originally planned by more than 80 percent.
During the integration, business risk arising from customer attrition was effectively controlled.
The "best of breed" talent selection process retained key talent and capabilities for further growth.
As a result, value creation exceeded prior expectations and left the client in a strong position to further take advantage of its expanded scale.