Successful M&As create synergy. Please advice specific reasons where this synergy could come from

Expert Solution

Synergy- 2+2=5 (Its synergy) It mean combined effect can be greater than individual effect. We can say that the value and performance of two companies combined will be greater than the sum of the separate individual parts.

Do M&A creates Synergy- Yes M&A creates synergy. M&A is done for synergy that result in increased revenues, combined talent, and technology, or cost reduction additionally synergy helps in combining products or markets.

Synergy could come from-

Revenue- It mean two companies combined can generate higher sales than the sum of their individual sales which result in greater revenue. Revenue expansion can be done from cross-selling complementary products to customers, having more pricing power with consumers, and expanding or being able to enter into new markets and new geographical locations.

Cost- Synergy in cost can be achieved by access to information technology that would allow for operational efficiencies, access to better supply chain relationships, there may be cost savings, Better distribution sales and marketing channels may allow the merged firm to save on costs,

Financial- Financial synergy can be achieved by combining the financial assets and liabilities of M&A companies.

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