Synergy refers to the concept that the combined value and performance of two companies will be greater than the sum of their individual parts. This principle is often a key consideration in mergers and acquisitions, as businesses look to create additional value through collaboration and integration.

Characteristics:
– Increased Efficiency: Combining resources can lead to streamlined operations and reduced costs.
– Enhanced Innovation: Merging companies can share knowledge and expertise, fostering creativity and new product development.
– Market Expansion: Synergy can provide access to new markets or customer bases that were previously unattainable.
– Improved Competitive Advantage: A stronger combined entity can better compete against rivals, leveraging strengths from both companies.

Examples:
– Cost Synergies: A merger between two manufacturing companies may allow them to consolidate production facilities, reducing overhead costs and improving profit margins.
– Revenue Synergies: A technology firm acquiring a software company may lead to cross-selling opportunities, where existing customers of both companies can benefit from a broader range of products.
– Operational Synergies: A retail chain merging with a logistics provider can optimize supply chain operations, resulting in faster delivery times and lower shipping costs.