---
name: synergy-identification-sizing-calculator
description: "Systematically identifies and sizes cost synergies (procurement, headcount, facilities, IT, distribution) and revenue synergies (cross-sell, market expansion, pricing) between an acquirer and target, producing a sized synergy table with dollar ranges, confidence levels, one-time costs to achieve, and time-to-realize estimates. Use when quantifying deal value, building a synergy case for an M&A transaction, pressure-testing a target's standalone valuation, or preparing integration planning inputs."
argument-hint: "[acquirer-profile] [target-profile]"
allowed-tools: ["Read"]
---

# Synergy Identification & Sizing Calculator

## Purpose
Convert acquirer and target business inputs into a defensible, line-itemized synergy estimate — separating cost from revenue synergies, sizing each with a dollar range, and attaching a confidence level, cost-to-achieve, and time-to-realize to every line. Replaces the round-number synergy assumption ("we'll find 5% of combined cost") with a bottom-up build a deal committee can interrogate.

## When to Use
Invoke this skill when the user asks to:
- Quantify the synergy value of a specific acquisition or merger
- Build or pressure-test a synergy case for a deal committee or board
- Justify a purchase price premium above standalone value
- Separate credible synergies from aspirational ones before signing
- Produce integration planning inputs (workstream targets, phasing)
- Compare synergy potential across multiple acquisition targets

## Inputs Required
Before starting, collect:
- **Acquirer profile**: Revenue, headcount, gross/operating margin, primary cost categories, geographic and customer footprint
- **Target profile**: Same metrics for the target — revenue, headcount, margins, cost structure, footprint
- **Deal thesis**: The strategic rationale (scale, adjacency, geographic expansion, capability, consolidation)
- **Overlap map**: Where the two businesses overlap — shared suppliers, duplicate functions, common facilities, adjacent or shared customers
- **Combined addressable spend** (if available): Procurement categories and approximate spend by category
- **Deal size / EV**: Enterprise value or purchase price, to frame synergies as % of deal value
- **Integration constraints**: Regulatory limits, retention commitments, union/works-council obligations, carve-out dependencies

If cost-category detail is missing, size using industry-standard cost-mix benchmarks for the sector and flag each estimate as benchmark-derived (lower confidence).

## Instructions

### Step 1: Frame the Synergy Baseline
Establish what the synergy is measured against before sizing anything:
- **Combined cost base**: Sum acquirer + target addressable cost, by category (COGS/procurement, personnel, facilities, IT, SG&A, distribution)
- **Combined revenue base**: Sum both revenue lines and identify the customer/product overlap and white space
- **Frame as % of deal value**: Total run-rate synergies will be compared to EV — flag if the emerging number exceeds ~40% of EV, a signal the case is over-relying on synergies to justify price

### Step 2: Size Cost Synergies by Category
Work each category bottom-up. For every line, produce a low–base–high dollar range, not a point estimate.

**Procurement / COGS**
- Identify overlapping spend categories where combined volume unlocks better pricing
- Typical realizable savings: 3–8% of addressable third-party spend for direct materials; 5–15% for indirect/SG&A categories
- Higher confidence where both parties buy the same inputs from different vendors

**Headcount / Personnel**
- Identify duplicate roles: corporate/G&A functions (finance, HR, legal, IT), overlapping leadership layers, redundant sales coverage in shared territories
- Size as # of roles × fully-loaded cost; typical corporate overlap removal: 15–30% of combined G&A headcount
- Explicitly net out roles protected by retention or regulatory commitments

**Facilities / Real Estate**
- Identify co-located or redundant offices, plants, warehouses, retail
- Size as avoided lease/operating cost + any owned-property monetization; net against lease-break and relocation costs
- Time-to-realize is usually longer here — bind by lease-expiry timing

**IT / Systems**
- Consolidation of duplicate platforms (ERP, CRM), license rationalization, data-center/cloud consolidation
- Size the run-rate saving separately from the (often large) one-time migration cost

**Distribution / Logistics / Network**
- Route consolidation, shared distribution centers, freight volume leverage

For each line, capture: **run-rate saving range**, **one-time cost to achieve**, **confidence (High/Medium/Low)**, **time-to-realize (0–12 / 12–24 / 24–36 months)**.

### Step 3: Size Revenue Synergies by Category
Revenue synergies are inherently lower-confidence than cost synergies — reflect that in confidence labels and discount the base case accordingly.

**Cross-Sell**
- Acquirer products into target's customer base and vice versa
- Size as: relevant customer count × realistic attach rate × per-customer revenue × acquirer margin; keep attach-rate assumptions conservative (single digits in year one)

**Market / Geographic Expansion**
- Selling one party's products through the other's channels, sales force, or geographic footprint
- Size against addressable market entered, ramp curve, and capacity to serve

**Pricing / Portfolio**
- Reduced price competition where the two overlapped, or premium capture from a broader bundle
- Flag antitrust sensitivity explicitly — do not size price increases that assume reduced competition in concentrated markets

**Customer Retention / Churn Reduction**
- Any thesis where the combined offering reduces churn — size as retained revenue × margin

Attach the same four fields to each revenue line, plus a **dis-synergy check**: revenue at risk from customer overlap, channel conflict, or attrition during integration. Subtract dis-synergies explicitly.

### Step 4: Apply Confidence Weighting
Produce a risk-adjusted total alongside the gross total:
- **High confidence** (typically procurement volume leverage, duplicate G&A removal): count at ~90–100% of base
- **Medium** (facilities, IT consolidation, defined cross-sell): count at ~50–70%
- **Low** (market expansion, pricing, speculative cross-sell): count at ~20–40%
- Present both **gross run-rate synergies** and **risk-adjusted run-rate synergies**

### Step 5: Phase and Net the Value
- **Phase run-rate synergies** across Year 1 / Year 2 / Year 3 based on time-to-realize
- **Net against cumulative cost-to-achieve** to show the year of positive net contribution and payback period
- State the total one-time investment required to unlock the run-rate

## Output Format
- **Structure**: Narrative baseline framing → cost synergy table → revenue synergy table → confidence-weighted summary → phasing schedule
- **Length**: 900–1,300 words plus the tables
- **Format**: Two sized tables (cost, revenue) — columns: *Synergy Line | Run-Rate Range (Low–Base–High) | One-Time Cost | Confidence | Time-to-Realize* — followed by a summary table and prose commentary
- **Sections**: Synergy Baseline → Cost Synergies (by category) → Revenue Synergies (by category) → Dis-Synergies → Confidence-Weighted Summary → 3-Year Phasing & Payback → Key Risks and Assumptions
- **Tone**: Corporate development director — quantitative, skeptical of upside, explicit about assumptions; every number is defensible or flagged

## Quality Checklist
Before delivering output, verify:
- [ ] Cost and revenue synergies are in separate tables, never blended
- [ ] Every synergy line has all four fields: run-rate range, one-time cost, confidence, time-to-realize
- [ ] A gross total AND a risk-adjusted total are both shown
- [ ] Dis-synergies (revenue at risk, integration attrition) are explicitly subtracted, not ignored
- [ ] Total run-rate synergies are expressed as a % of enterprise value, with a flag if above ~40%
- [ ] Pricing/market-share synergies carry an antitrust caution where relevant
- [ ] Every benchmark-derived estimate is labeled as such and given lower confidence

## Notes
- Cost synergies are the credible foundation of most deals; revenue synergies are where deals over-promise — weight the case accordingly and let the committee argue the upside, not the base.
- The cost-to-achieve is frequently underestimated. A synergy that costs more to realize than it saves in the first two years is a red flag, not a win.
- If the risk-adjusted synergy total is doing most of the work to justify the premium, the recommendation should be to renegotiate price, not to inflate assumptions.
- Facilities and IT synergies are real but slow — never phase them into Year 1 unless a specific lease expiry or migration date supports it.

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## How to use this skill

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