Synergy
Short definition
Synergy is the assumption that the combined firms will produce more cash than the sum of the standalones. Cost, revenue, tax and financing synergy are separate proofs; not all of them are EBITDA.
Detailed explanation
Cost synergy (overlapping SG&A, procurement) is more tangible; revenue synergy carries cannibalisation and customer loss. Integration cost (IT, severance, advisors) leaves cash before synergy arrives.
Embedding synergy in the multiple impairs goodwill if it fails. Timing can break DSCR in the first years.
Why it matters for the CFO
A control premium is often printed on synergy PV. Without cash and a date, the premium is a transfer to the seller’s holders.
How to read it
Gross synergy − integration − tax − non-delivery probability = the decision input. There is no universal “synergy %”.
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What to learn next
Definitions are educational. They are not investment, credit or tax advice.