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The hidden value in postmerger pricing
Investment bankers, accountants, lawyers, and consultants may help executives consummate a merger or acquisition but often overlook an obvious way of paying for those deals: adjusting the price of products or services after the merger. Doing so doesn't mean simply raising prices across the board; pricing must reflect the true value delivered. If consolidation brings real benefits to customers—and if essential functions of the merged company are operating smoothly—higher prices may be justified. In any case, price structures, discount schedules, and payment terms must be consistent across the combined enterprise.
The take-away: Pricing can contribute 30 percent of the value of synergies in a deal—and destroy value just as dramatically if mishandled. Mergers present a rare opportunity for companies to initiate change. Pricing must be a part of that new agenda.
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© 1992-2003 McKinsey & Company, Inc
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