Synergy

Examples of Synergy in the following topics:

• Valuing the Target and Setting the Price

  • As synergy plays a large role in the valuation of acquisitions, it is paramount to get the value of synergies right.
  • Synergies are different from the "sales price" valuation of the firm, as they will accrue to the buyer.
  • Synergy creating investments are started by the choice of the acquirer and, therefore, they are not obligatory, making them real options in essence.

• Reasons for Combining Businesses

  • Synergy: Synergy is two or more things functioning together to produce a result not independently obtainable.
  • If used in a business application, synergy means that teamwork will produce an overall better result than if each person within the group was working toward the same goal individually.
  • Synergy can take the form of higher revenues, lower expenses, or a lower overall cost of capital.
  • Manager's hubris: A manager's overconfidence about expected synergies from a merger may result in overpayment for the target company.

• Other Topics in M&A

  • Despite the goal of value creation and synergy, results from mergers and acquisitions are often disappointing compared with results that are predicted or expected.
  • The alliance is a cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts.

• The Weightings

  • Special value refers to a synergy that may exist between two parties that makes the fair price of a transaction higher.