Synergy

Synergy is the extra value created when two companies combine, measured as the combined firm's value minus the sum of the two companies' standalone values, from cost savings or revenue gains.

ByHoang TruongUpdated July 11, 2026

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Company A is valued standalone at €80,000,000 and Company B at €50,000,000, summing to €130,000,000. Analysts estimate the combined firm at €150,000,000. Synergy value is €150,000,000 − €130,000,000 = €20,000,000 — value created purely by the two businesses operating as one rather than separately.

Where it fits

SubjectCorporate FinanceCoreTopicBusiness Valuation & DCFCore

The formula

LaTeX

S = V_{AB} - (V_{A} + V_{B})

Variables

$S$: Synergy value (€)
$V_{A B}$: Value of the combined firm (€)
$V_{A}$: Standalone value of Company A (€)
$V_{B}$: Standalone value of Company B (€)

Measures the value created (or destroyed) purely by combining two companies into one.

Check yourself

PracticeCORE

Company X is valued standalone at €45,000,000 and Company Y at €35,000,000. After combining, analysts estimate the merged entity would be worth €95,000,000, mainly from eliminating duplicate distribution costs. What is the estimated synergy value from the combination?

Select an answer to check your understanding.