Post-merger revenue dip
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Post-merger integration often demands significant time and effort from the acquired company’s management. Do you forecast any potential revenue dip in the initial months following the merger as a result of this focus? If so, what is considered a typical percentage range for such a dip?
We had forecasted flat to modestly low impacts to revenue changes from pre- to post-integration. However, the reason for this was due to our ability to service the targets existing customers from other warehouses or regionally close market points. From an organic revenue perspective though, I think it’s really difficult to land on a one-size-fits-all approach to what percentage dip may occur. During the initial due diligence of the target many factors should be noted that may be drivers for any revenue shortfall and the measurement of that shortfall. Factors such as average sales size, the sales cycle, cyclical sales demands and timing, as well as the acquiring company’s ability to mitigate any potential shortfalls. But the possibility is absolutely there and should be considered when analyzing the target company.
Yes, we did account for a potential revenue dip in our business case, primarily due to the migration efforts and the overall focus required for integration activities. However, I believe it’s difficult to define a typical percentage range, as the impact varies greatly depending on factors such as the size of the organizations, market dynamics, maturity levels, and the complexity of the product or services offered. Each integration brings unique challenges that influence the extent of the revenue dip.
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