Synergies are the additional value created by combining two companies that neither could generate independently — revenue synergies (cross-selling, geographic expansion, combined product offering) or cost synergies (shared support functions, economies of scale, procurement rationalisation). In M&A, the control premium paid typically reflects expected synergies. In valuation, standalone value (without synergies) is distinguished from investment value (with acquirer-specific synergies) — the difference justifying the acquisition premium, which must be lower than the NPV of synergies for the deal to create value.

‍

Example: a Swiss food group acquires a competitor for CHF 25.0 million (standalone value: CHF 20.0 million). Identified synergies: CHF 1.2 million annual procurement savings, CHF 800,000 logistics rationalisation and CHF 600,000 shared support functions. NPV of synergies = CHF 2.6 million × (1-14%) / 9.5% = CHF 23.5 million. The CHF 5.0 million premium paid is well covered — value-creating for the acquirer's shareholders.

‍

Hectelion quantifies and values synergies in buy-side M&A mandates to justify acquisition premiums and structure post-closing integration plans.