Glossary - Synergies
Synergies refer to the benefits that two entities (often companies) may achieve from their merger or partnership. The concept suggests that the combined performance and value of two companies will be greater than the sum of their separate individual parts. Synergies can result from cost savings, improved revenue opportunities, or enhanced operational efficiency among other factors.
Also known as
- Strategic Synergies
- Corporate Synergies
Use cases examples
- Merger Agreement: Pursuant to the terms of this merger agreement, both companies anticipate realizing significant cost-saving synergies estimated to exceed $100 million annually.
- Investment Proposal: The strategic acquisition of Company B by Company A is expected to generate substantial revenue-enhancing synergies through cross-selling opportunities and expanded product lines.
Considerations for investors
- Perform due diligence to assess the attainability of the proposed synergies and their impact on the value of the investment.
- Consider the potential risks associated with realizing synergies, including integration difficulties, cultural clashes, and overestimation of cost savings or revenue opportunities.
Considerations for founders
- Understand how synergies are calculated and the realistic time frame to achieve them following a merger or acquisition.
- Evaluate whether the projected synergies align with the company’s strategic goals and the interests of shareholders.
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