Move guide
Check the fit and find the synergies
Your report suggested a move on at least one of these two questions:
- whether the acquisition fits your strategy;
- whether you have real synergies with the target.
This move guide writes the deal rationale in the words of your own strategy, against the option of building it yourself. Then it gives every synergy a mechanism: who does what differently, an owner and a start date.
1. When it applies
Use this move guide if your report placed either question at "Red flag" or "Doubtful".
| Question | Where it may sit today | Where this move guide aims |
|---|---|---|
| Would this acquisition align with our strategy? | Red flag: "The logic is “it came up for sale”: the strategy must be rewritten to fit the deal, and we could build the same thing cheaper." Doubtful: "The rationale is diversification or defence, written after the decision; “faster than building” is asserted without the comparison." |
Supported: "The target fills a named gap in the stated strategy, is demonstrably years ahead of the organic path, and improves our market position within what regulators allow." |
| Do we have commercial and / or operational synergies with this target? | Red flag: "The claimed synergies don't survive first contact: no shared customers, costs or capabilities." Doubtful: "Synergies exist as a number, not a mechanism." |
Supported: "Each revenue and cost synergy has a mechanism, an owner and validated assumptions." |
If both already sit at "Supported" or higher, skip this move guide.
2. What to do
Four steps. They take two to three weeks.
- Write the deal rationale in the words of your strategy document. Name the gap the target fills.
- Compare building it yourself with buying it, on cost, time and risk, before the next bid.
- Check the combined position against what competition regulators allow.
- Give every synergy a mechanism. Say whose sales team sells what to whose customers, and which sites and roles go. Give each one an owner and a start date. Sort them by area, as in the chart below.
Table A below holds the rationale and the synergy register.
3. What to produce
One table.
Table A. The rationale and the synergies
| Item | What we wrote | Owner (name) | Start date |
|---|---|---|---|
| The gap in our strategy the target fills | |||
| Build against buy: the answer and why | |||
| The competition check | |||
| Synergy 1: the mechanism | |||
| Synergy 2: the mechanism | |||
| Synergy 3: the mechanism |
A synergy with no mechanism is a number someone hopes for.
4. A worked example
Illustrative. Written for this move guide. It describes no client.
A dental products group is looking at a maker of orthodontic aligners. The board paper says the deal "diversifies the portfolio".
The rationale.
- The group's strategy names one gap: a product dentists use in every treatment plan. The aligner maker fills it. Building the same capability would take about five years.
The competition check.
- The combined share in each product stays well within what the regulator has allowed before.
The synergies.
- Cost: one sales team calls on each practice. Revenue: the group's sales team sells aligners to its own dental customers. Each line has an owner and a start month.
Three weeks on.
- 1 gap in the strategy, named in its own words
- 5 years to build it yourself, against buying it
- All synergies with a mechanism and an owner
On a retake, both questions could be answered at "Supported".
What it looked like in our work
From our own work. Redrawn.
For a buyer of a building-products manufacturer, our due diligence mapped every possible synergy before sizing any of them. Each had its area and its mechanism. The losses the deal could cause sat on the same map.
- Possible synergies
- Cost synergies
- Back officeCombine roles in IT, people, finance and buying
- Main inputBuy it together, as a larger buyer, at a lower price
- ManufacturingUse one party's spare equipment and the other's practices
- Warehouses and freightShare sites and one freight provider
- Sales rolesCombine marketing and account management
- Revenue synergies
- Stock closer to customersA larger warehouse network, faster supply
- Cross-sellingSell through whichever party has the stronger relationship
- A new regionTake the range into a neighbouring market
- Losses the deal could cause
- Group policiesGroup pay, systems and sustainability rules raise costs
- Local relationshipsCustomers who valued a locally owned supplier
- Cost synergies
The map came first, with no number on it. Sizing followed, and only for what survived the mechanism test.
5. Effort and dependencies
- Chief executive and head of strategyWrite the rationale and run build against buy.
- Synergy ownersEach writes and signs the mechanism for their line.
- LegalRuns the competition check.
What you need
- Your own strategy document, as it stands.
- The target's definition and economics from defining the target.
How long
- Two to three weeks.
What gets in the way.
- A rationale written after the price. A deal rationale written to justify a price already agreed reads as one. Write it before the first bid, in the strategy's own words.
6. How will you know it worked?
The test is whether the rationale and each synergy would survive a hostile reading. Retake the check when Table A is full. Each of these should be true when you answer:
| Question | You can answer Supported when | A document alone does not count if |
|---|---|---|
| Would this acquisition align with our strategy? | The target fills a gap named in the strategy, and buying beats building on cost, time and risk. | The rationale was written after the price. |
| Do we have commercial and / or operational synergies with this target? | Each synergy has a mechanism, an owner and assumptions someone has checked. | The synergies are a total with no lines under it. |
The worked example is illustrative.
Think we've used your work without proper credit? Tell us and we'll fix it.