A (positive) synergy is the increase in shareholder value coming from mergers and acquisitions activity. Below is a list of potential synergies that are usually considered for mergers and acquisitions. If a synergy applies for a deal and how big the synergy is has to be analysed and planned for each deal.

Keep in mind that synergies are not self-fulfilling prophecies. You need careful planning, execution and tracking of synergy related work to realize synergies.

Synergies seen from outside of the companies

Looking at a company from the outside, the synergies of a merger can come from the following sources:

Relationship to Suppliers

• increased negotiation and purchasing power

• consolidation of existing suppliers and contracts

• leveraging better existing conditions for a supplier contract from target or acquirer

Supplied goods and services

• increase in purchasing volume and potentially a decrease in price

Relationship to financial institutions

• increased negotiation and purchasing power

Relationship to customers

• increased negotiation and purchasing power

• increased revenue from upselling and cross-selling opportunities

• increase in portfolio assets to be sold to customers

• increase in the number of customers and/or markets covered

Sold goods and services

• revenue effects from broadened portfolio

• faster time to market since acquired goods and services are available immediately for selling by the acquirer

Relationship to partners

• increased number of partners

Relationship to government and states

• potential synergies for corporate tax

Synergies seen from the inside of companies

Synergies for all corporate functions

• Centralization of tasks and elimination of organizational and functional redundancies is often cited as a main source of synergies

 Synergies for the business models

• The target introduces a new business model for the acquirer

Cost synergies

Looking at cost synergies, two main sources of cost synergies are often cited: elimination of redundancies and reduction of inefficiencies.

Learn more from my upcoming book on merger integration.....

(C) Dr. Karl Popp 2019