Synergies
Investment Banking glossary · M&A & LBO Modeling Dynamics
Definition
Incremental value from combining two companies (1 + 1 = 3).
Synergies in plain English
Synergy is the reason two companies merge and claim to be worth more together than apart — the "1 + 1 = 3" effect. It comes in two flavors: cutting costs (one headquarters instead of two, laying off duplicate staff) and boosting revenue (selling your products to each other's customers). Think of two lemonade stands merging: they share one cart and one sign, so profit jumps more than just adding their old profits. Bankers love pitching synergies to justify a high purchase price, but cost savings are believable while revenue synergies are often optimistic hype.
Learn these first
Practice Synergies
Related Investment Banking terms
Investment Banking practice questions · Investment Banking flashcards · Investment Banking study guide