The Art of M&A Strategy: A Guide to Building Your Company's Future through Mergers, Acquisitions, and Divestitures

CHAPTER 2Consolidation: Value in Cost Synergies

And then there were none.

—Alfred Hitchcock

Many industries undergo periods of consolidation in which some companies identify opportunity to achieve competitive advantage through increased scale or scope, and others must follow in order to remain competitive. The opportunities are often triggered by changes in the market related to technology, globalization, or regulation that make larger scale or scope possible or more important.

When companies in the same industry buy others to increase scale or scope, revenues are typically additive while costs are not. Simply put, it usually takes less than twice the costs to run a company twice the size in the same business. As mentioned in the Introduction ...