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Merger Synergy Value Calculator

Work out merger synergy value instantly with clear inputs, formula shown and shareable results.

About Merger Synergy Value Calculator

Synergy value is the capitalised value of recurring savings less the one-off cost of achieving them. Using a growing perpetuity is appropriate for structural savings, but the cost to achieve — redundancy, systems integration, site closure — is the figure most acquirers underestimate.

Formulas

Gross synergy value

PV = Annual synergies / (Discount rate - Growth rate)

Net synergy value

Net = PV - Cost to achieve

Worked example

With the default values below, Merger Synergy Value Calculator returns Net present value of synergies of $44,000,000.00. Change any input above and every figure here is recalculated in your browser.

Inputs used

Annual recurring synergies
4,000,000
One-off cost to achieve
6,000,000
Discount rate
10
Long-term growth of synergies
2

Results

Net present value of synergies
$44,000,000.00
Gross present value of synergies
$50,000,000.00
One-off cost to achieve
$6,000,000.00
Payback on integration cost
1.50

Step by step

  1. 1Values used
  2. 2Gross synergy value
  3. 3Net synergy value
  4. 4Net present value of synergies= 44,000,000.00
  5. 5Gross present value of synergies= 50,000,000.00
  6. 6One-off cost to achieve= 6,000,000.00
  7. 7Payback on integration cost= 1.50

Assumptions and limits

  • The result is derived only from the 4 inputs listed above. Anything not among them is not part of the calculation.
  • In particular, this calculator does not take inflation or tax into account.
  • Figures are rounded for display to 2 decimal places, so totals built from several rounded parts can differ slightly from the unrounded arithmetic.
  • This is an estimate for general information and not professional financial, tax or legal advice. See the full disclaimer for the limits that apply to this kind of calculator.

How these calculators are built and tested is described on the Methodology page. If a figure looks wrong, please report it.

Frequently Asked Questions

Should revenue synergies be included?

Treat them separately and discount them harder. Cost synergies are largely under your control; revenue synergies depend on customers.

How much of the synergy value should go into the price?

Paying away the whole synergy value transfers all the benefit to the seller and leaves you carrying the execution risk for nothing.

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