The truth about synergies

I watched an interview at lunchtime today on the BBC News channel where Roger Carr, chairman of Cadbury, was being asked a number of questions concerning his company’s position as it confronts a hostile takeover bid by Kraft Foods.

Towards the conclusion of the interview, Carr said something most interesting in response to a question by interviewer Simon Jack about expected synergies if Kraft succeeds:

Synergies is a euphemism for heavy cost cuts.

That’s probably what anyone who’s been through synergies following an acquisition has experienced, whether hostile or otherwise.

I certainly have, in a previous life. And I’ve lost count of how many times I’ve used the word ‘synergies’ when writing press releases and executing other communication to suggest the positiveness of a new combination and the great things that are expected as a result and especially because of synergies, with nary a glimmer of anything to suggest a different reality.

That reality nearly always does involve cuts, not only financial but also people. I don’t think you should be surprised at such an eventuality when two or more firms comes together. I just wish there were greater corporate honesty about what to really expect.

Whether or not Kraft succeeds, and whether or not their doing so may result in ‘synergies,’ I applaud Mr Carr’s honesty. I hope his shareholders and employees appreciate it.