Valuation and investment
Synergy
Extra value created when two businesses combine.
Last reviewedWhat does Synergy mean?
Synergy is the idea that two companies together can be worth more than the two apart. Cost synergy means saving money by removing duplicated functions; revenue synergy means selling more by combining products or reach. Synergies are often overestimated and take time and money to achieve, so test whether a deal still works without them.
Where does it come up in case interview prep?
- Main players, trends 2024 to 2026, regulation and casesLesson in Pharma, biotech and medical devices
- Mergers, acquisitions, and due diligenceLesson
- Consumer goods players, trends, and how to crack the casesLesson in Consumer packaged goods (FMCG)
- Restaurant players, trends, and how to crack the casesLesson in Restaurants and food service
- Media players, trends, and how to crack the casesLesson in Media, streaming, gaming, and advertising
- Education players, trends, and how to crack the casesLesson in Education and edtech
- Organization and post-merger integrationLesson
- Stretch cases: profit to pricing, and entry to acquisitionLesson in Integrated multi-part cases
Related terms
- Due diligenceCareful checking of a target before you buy it.
- Return on investment (ROI)The gain from an investment relative to its cost.
- Payback periodHow long until an investment earns back its cost.
- Time value of moneyMoney today is worth more than the same money later.
- Discount rate and hurdle rateThe rate used to turn future cash into today's value.
- Cost of capital (WACC)The return a company must earn to satisfy its lenders and owners.
- Net present value (NPV)Today's value of all future cash flows, minus the upfront investment.
- IRR (internal rate of return)The discount rate at which NPV is exactly zero.