Innovative Cost Management
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Typically, takeovers and merger transactions create value for shareholders in two ways.
First, the takeover/merger can help a business to sell more goods or services than the competition in new or existing markets. This effect is known as “revenue synergy”.
Second, the takeover/merger can allow the combined businesses to operate more efficiently together. This effect is known as “cost synergy”.
In both cases, the assumption is that the performance of the combined businesses will exceed the expected performance of each business on their own. How does this work? Because of synergy. Something happens to the two businesses combined which cannot happen if they simply operate independently.
Deloitte highlighted the potential for cost savings that arise following a takeover or merger by looking at the details of 150 takeovers completed between 2004-2007 to analyse the reasons why some businesses were able to make more significant cost savings (cost “synergies”) than others.
The Deloitte report found that the average overhead cost synergy was around 17% of the combined overhead cost base of the buying and the target company, where the entities are of comparable size; So, for every £1million of overheads in the two businesses operating independently, a takeover/merger can result in overhead savings of £170,000 per year.
That’s a big saving, though it doesn’t necessarily happen straight away.
If this saving can be coupled with the work and access to pricing that PES Business has, this can be leveraged to ultimately drive increased profit return in a very short period of time. Any potential costs of redundancy, legal fees or acquisition costs can be potentially offset. Investment in new machinery systems and people can be mobilised quicker due to the savings we can make for you.
Tel: 0114 321 6375
We helped a national buying and distribution company, situated in the Midlands save £1.5m in the first year of our involvement by helping implement a co-ordinated procurement strategy.
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While hiring a cost consultant has many benefits to your company, they are not to be confused with a cost broker. Although they have some similarities and work in the same sector, they are not the same thing.