Customer Retention's Impact on Merger Economics PPT

This PPT slide, part of the 28-slide Toolkit for Commercial Due Diligence PowerPoint presentation, emphasizes the critical role of customer retention in the context of mergers and acquisitions. It highlights that even a minor loss of customers—specifically as little as 5%—can significantly undermine the financial viability of a business. The text notes that losing 10% of customers is a frequent occurrence, with some mergers experiencing losses as high as 20%. This underscores the fragility of customer relationships and the potential economic impact of attrition.

The slide also presents a statistical insight: a one-percentage-point reduction in the attrition rate of the top 20% of customers can lead to an increase in overall profits ranging from 5% to 10%. This suggests that focusing on retaining high-value customers is not just beneficial, but essential for sustaining profitability.

On the right side, a graph illustrates the relationship between retention performance and merger economics. It features key metrics such as Target Value, Minimum ROE Value, and Budget, with curves representing acceptable defection rates and their implications on value creation. The graph visually conveys that as customer defection increases, the potential for achieving target financial outcomes diminishes. The intersection points, labeled as "Budgeted Break Even" and "Equal value," indicate critical thresholds for decision-making.

Overall, this slide serves as a compelling reminder for executives to prioritize customer retention strategies during mergers, as the long-term financial health of the organization hinges on maintaining strong customer relationships. The insights provided can guide strategic planning and operational focus for businesses contemplating mergers or acquisitions.

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Due Diligence Strategic Planning Value Creation Customer Retention