Some think independent work is easier than dealing with others. Working together helps you create better outputs. With the help of your coworkers, you can improve efficiency and stay on track to achieve your goals. In business, you’ll often hear the phrase, “two heads are better than one.” You also probably find yourself tasked with way too much to complete on your own. Understanding synergy: The power of combined efforts In my social life, I like skiing, kitesurfing, boxing, and am a professional horse rider in show jumping competitions. I am an Electric and Electronic Engineer with a Masters in Engineering Management. In this case my hope would be that deal synergies are significantly lower than the management 'stretch' - in which case put integration on hold for a couple of years.Īny thoughts or comments on the above welcomed.Zeynep Cansu Yildirim Follow I am an experienced PM of 5+ years with 9+ years of analyst and leadership experience in software companies, currently working as a PM in an e-commerce company. Any element of integration can muddy-the-water and be used as an excuse for non-delivery. ![]() The worst case is the one you describe, where there's possibly an element of 'stretch' in management's valuation and so the acquirer wants the team to stay and deliver the business plan. Integration can be light-touch and the finances remain relatively stand-alone. Synergies are likely to be from a change of location, brand, finance system and some cross-selling revenue. ![]() Next best is when the target fits into a portfolio run by the acquirer. Integration can continue with a steering committee, agreed plans etc. Payments can be linked to the CEO staying, and some headline numbers: revenue, key client retention, staff retention. This is probably the easiest type of Earn Out. The management team underneath, or the acquirer, isn't in a position to immediately take over the reigns. I've seen Earn Outs when the Founder/CEO is seen as critical to the company achieving the business plan (both sides agree on the same valuation in this case). Earn Outs and Integration just don't mix well. Possibly the most challenging question for post merger integration. ![]() Especially from M&A lawyers who deal with this on a daily basis. The basic idea is on the table and looking forward to your comments. This will remove a barrier and enable a more complete integration between the two businesses. Also define the resources, cost and initiatives that will be needed to drive those revenues. The suggested remedy to create a win-win is to decouple the costs from the revenues and define the delta between sellers and buyers revenue expectations per product line or market or customer. What are the consequences for the post merger integration? Does the target need to be kept at arms length for 2 years while the earn-out receiver(s) are focusing on hitting their earn-out? Integration and synergy capture only if they support the earn-out and can be vetoed by sellers? Accounting and finances kept as is in target to ensure that the revenues are calculated correctly? So, then a construction is made around tying a percentage of the price of the business to hitting a revenue or profit level in the future e g 20% of the price of the business will be paid out if the revenues have increased from 80M to 100M after two years (hence 80% will be paid at closing). The driving factor for including an earn-out is often how the parties view the future revenue potential. Earn-outs can be used to bridge the difference in sellers vs buyers valuation of a business.
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