Synergy

Synergy is a phenomenon that occurs when the whole is greater than the sum of its parts. When applied to mergers, a synergistic merger occurs when the post-merger earnings exceed the sum of the separate companies' premerger earnings.

Definitions

According to Financial Management Theory and Practice by Eugene F. Brigham and Michael C. Ehrhardt (13th edition),

Synergy. Occurs when the whole is greater than the sum of its parts. When applied to mergers, a synergistic merger occurs when the post-merger earnings exceed the sum of the separate companies' premerger earnings.

According to Fundamentals of Financial Management by Eugene F. Brigham and Joel F. Houston (15th edition),

Synergy. The condition wherein the whole is greater than the sum of its parts; in a synergistic merger, the post-merger value exceeds the sum of the separate companies' premerger values.

According to the Corporate Strategy by Lynch (4th edition),

Synergy. The combination of parts of a business such that the sum is worth more than the individual parts – often remembered as '2 + 2 = 5'.

According to the Strategic Management by Parnell (4th edition),

Synergy. When the combination of two firms results in higher efficiency and effectiveness that would otherwise be achieved by the two firms separately.

Related concepts

• Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.

Related lectures

• Introduction to Financial Management.