La business synergy defines the financial benefits generated through cost savings and leveraging revenue growth opportunities when companies are brought together through a transaction.
In particular, this is because:
Business synergy is a form of do business and co-operate with other companies that are Business Partner in a way that makes the whole more valuable than the sum of its parts..
The creation of collaborations and alliances at this level implies that more can be achieved together than each of the components of this integrated unit could have achieved separately.
«Triangulation» is an invaluable technique frequently used to evaluate and build confidence in the benefits of business synergy..
Triangulation includes the assessment of the quality of available information, the historical delivery track record, and comparison with external transaction benchmarks that support management's assumptions about the magnitude of the synergy benefit.
It is common for stakeholders to have key questions about the synergy case, requiring an independent assessment of aspects such as:
Before proceeding towards the creation of business synergy, the parties must determine what savings can be achieved during the integration process by eliminating functional overlap and maximising economies of scale. in the property’s footprint, acquisition and supply chain costs.
However, it should be borne in mind that Revenue synergies, by their nature, are more difficult to quantify. and, in most cases, analysts discount them in their valuation model.
This is due to their dependence on market conditions, prices, and external factors that are outside of the business's control.
Whatever the combination of cost and revenue synergies in the business accounting, it is important to establish the combined organisation’s financial baseline against which synergy benefits will be measured. Only benefits arising as a direct result of the transaction can be classified as synergies.
Another important aspect to consider is the costs that need to be incurred in order to achieve the benefit of business synergy. Will retention bonuses be necessary? Will it be necessary to launch a staff training programme?
It could be said that, the most important thing is, first and foremost, to ensure that all stakeholders understand the details.
Furthermore, it is important to be aware that synergies must be prioritised and form the basis of integration planning. Finally, when considering business synergy, it is advisable to link individual and team incentives and assign responsibilities.
