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'.
Related concepts
- Financial management. A combination of enterprise efforts undertaken in order to procure and utilize monetary resources of the enterprise.
