What is a 'margin bridge' and which components does it typically contain?
A margin bridge is the visual disaggregation of the change in EBITDA margin over the hold period. Standard format:
```
Entry margin 18%
+ Procurement savings: +1.5%
+ SG&A optimization: +1.0%
+ Pricing power: +0.8%
+ Mix effect (premium): +0.5%
+ Manufacturing efficiency: +0.7%
− Inflation impact: −0.3%
− R&D investment: −0.2%
= Exit margin 22.0%
```
4 percentage points of margin expansion over 5 years is realistic in the middle market — above 5 percentage points is rare without a game-changing initiative.
Deep diveShow more details
| Component | Range |
|---|---|
| Procurement / material costs | +0.5–2.5% |
| SG&A / headcount | +0.5–2.0% |
| Pricing | +0.3–1.5% |
| Mix effect | +0–1.0% |
| Manufacturing / operations | +0.3–1.5% |
| Inflation / wage pressure | −0.3 to −1.5% |
| Investments (R&D, IT) | −0.2 to −0.8% |
- "Synergies" as a single bucket: the IC wants a detailed bridge with clear levers and owners.
- Inflation impact underestimated: margin expansion too optimistic.
- Investment costs (R&D, IT) counted as one-time when they are recurring.
Question: "Which margin levers have the highest priority?"
Answer: "Procurement (fast, visible, measurable) and SG&A (easy to steer) first — day 1 through Year 1. Pricing is hardest, because it depends on customer mix and market position. In the 100-day plan, procurement is typically at the top"