Investment BankingIntermediate
Synergies
Extra value created when two companies combine, through cost savings or higher revenue.
Detailed explanation
Cost synergies come from removing overlaps; revenue synergies from cross-selling. Buyers often justify a premium by expected synergies.
Why it matters
Overestimated synergies are a frequent cause of failed acquisitions.
Key points
- Cost synergies are easier to achieve.
- Integration costs reduce them.
- Should be realistic and timed.
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Educational content only. Definitions and examples are illustrative and are not investment, tax or legal advice.