Synergies
Also called: cost synergies, revenue synergies, synergy
Synergies are the value created by combining two companies — cost savings from removing duplication, or revenue gains from cross-selling. Cost synergies are usually real and achievable, since headcount and facilities are countable. Revenue synergies are usually fantasy, and are the ones used to justify the last increment of a premium. The market's scepticism is reflected in the acquirer's share price falling on announcement more often than not.
Want more than a definition? Learn it in Capital Quarters →