What Are Synergies, and How Do They Affect an M&A Deal?

Synergies are the financial benefits expected from combining two companies. They can make an acquisition more valuable and improve the buyer’s earnings per share, but they also introduce execution risk. To evaluate an M&A deal, you need to understand where synergies come from and how they flow through an accretion/dilution model.

Author: Ishaan Nair Updated 5 min read

What synergies mean in an M&A deal

A synergy exists when two companies are expected to produce better financial results together than they could separately. In shorthand, the combined value of Buyer and Target exceeds the sum of their standalone values.

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