Synergies

Synergies describe the added value created when two companies are combined and the joint result is greater than the sum of its parts. In M&A transactions, expected synergies are often the central rationale for an acquisition and justify a purchase price above the standalone value, the so-called control premium.

A distinction is mainly drawn between cost synergies and revenue synergies. Cost synergies arise from economies of scale, bundled procurement, shared administration or the elimination of duplicate structures. Revenue synergies result from cross-selling, expanded distribution channels or access to new markets. Financial and tax synergies may also occur. A realistic quantification is crucial, since overstated synergies lead to inflated purchase prices.

In a company valuation, synergies are carefully separated from the standalone value. They influence the enterprise value and are particularly decisive in a roll-up strategy. In our M&A advisory, we assess synergy potential rigorously.