Work out merger synergy value instantly with clear inputs, formula shown and shareable results.
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.
Gross synergy value
PV = Annual synergies / (Discount rate - Growth rate)
Net synergy value
Net = PV - Cost to achieve
Treat them separately and discount them harder. Cost synergies are largely under your control; revenue synergies depend on customers.
Paying away the whole synergy value transfers all the benefit to the seller and leaves you carrying the execution risk for nothing.