Synergistic Effect

Synergistic effect

A violation of value-additivity in that the value of a combination is greater than the sum of the individual values.

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Synergistic Effect

The financial benefit (or, more rarely, detriment) that two companies may derive from a merger or acquisition. For example, two companies that merge may be able to produce more revenue than either one could produce independently by combining the most efficient processes each brings to the merger. The synergistic effect may also refer to the cost reduction a merger brings about by eliminating or streamlining redundant processes. The synergistic effect usually has a positive connotation, but one also occasionally hears of a negative synergistic effect, such as when the management teams of newly merged corporations do not work well with each other. Generally speaking, however, a synergistic effect makes the merged company worth more than its individual components were before the merger.