We would all agree that one of the main benefits of a merger or acquisition activity is the economies of scale that can lead to increased profitability and competitiveness.

The area that often gets the most attention in the quest for economies of scale is reduced headcount.  In the newly formed business, there will often be a duplication of effort that will need to be addressed…2 CEO’s, 2 VP’s of Sales, 2 COO’s etc.  Personnel expenses, such as salaries and employee health benefit costs are often the greatest expense for any business.   

But don’t forget about the economies of scale for the indirect costs.  When trying to bring together the various indirect costs for both organizations, you will probably have vendors with differing:

• Pricing Structures
• Technology/hardware
• Contract expirations
• Contract terms
• Early Termination Fees
• Geographic Footprints
• Longevity with the business

How do we best capture the new economies of scale with these indirect costs?

How do you decide which of the current vendors to utilize for the new organization?  

What if neither of the current vendors is the best option for a now larger and more complex business?  

By utilizing an outside resource like Schooley Mitchell, you can remove the subjectivity of both “parties” from the decision-making process and find a solution that takes into account all the factors noted above.