The importance of synergy in a merger
When two companies decide to merge, there could be a multitude of factors that motivate the deal. One company could approach another because it is interested in the technology that company has been developing. In some cases it might be more interested in the talented team that was responsible for creating a certain technology. Either way, the ultimate goal is to increase value and make a better company.
This goal is attainable, but for companies to achieve success, it is important to remember that synergy is a critical part of the M&A equation. What is synergy? Synergy means that when two companies join together, they will be able to achieve higher levels of success than they would have on their own. This means the combined companies will be able to generate better results in addition to creating increased value.
However just because two companies might seem to present an ideal opportunity for a merger, it does not mean that things will actually play out that way. For example, if two companies attempt to merge but their cultures are incompatible, it could mean the goal is not obtained. A significant consideration like this should be weighed in advance of making a deal, even if the deal looks good on paper. This way, companies take a step toward ensuring the success of the company after the merger goes through.
Consider your company and the one you may be planning to merge with—will your companies create a high level of synergy? Part of considering a deal should include having a strong understanding of the market and how to conduct negotiations. A trusted M&A advisor can help determine a successful acquisition strategy.