Synergies refer to situations where a buyer gets more value from an acquisition than the financials would predict. Or another way of thinking of it is situations where 1 + 1 = 3 in an acquisition.
There are 2 types of synergies:
- Revenue synergies where the combined company can up-sell and cross-sell to their customers or expand into new geographies.
- Cost synergies are when the combined company consolidated redundant expenses in order to lower costs and increase profitability. These may be things like redundant legal teams, administrative staff, or office buildings.
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