How Are Synergies Used In Merger Models?

1.	How Are Synergies Used In Merger Models?
Answer» REVENUE Synergies: Normally you add these to the Revenue figure for the combined company and then ASSUME a certain margin on the Revenue – this additional Revenue then flows through the rest of the combined Income Statement. Cost Synergies: Normally you reduce the combined COGS or Operating EXPENSES by this amount, which in turn boosts the combined Pre-Tax Income and thus NET Income, raising the EPS and making the deal more accretive. Revenue Synergies: Normally you add these to the Revenue figure for the combined company and then assume a certain margin on the Revenue – this additional Revenue then flows through the rest of the combined Income Statement. Cost Synergies: Normally you reduce the combined COGS or Operating Expenses by this amount, which in turn boosts the combined Pre-Tax Income and thus Net Income, raising the EPS and making the deal more accretive.

Answer»

REVENUE Synergies: Normally you add these to the Revenue figure for the combined company and then ASSUME a certain margin on the Revenue – this additional Revenue then flows through the rest of the combined Income Statement. Cost Synergies: Normally you reduce the combined COGS or Operating EXPENSES by this amount, which in turn boosts the combined Pre-Tax Income and thus NET Income, raising the EPS and making the deal more accretive.

Revenue Synergies: Normally you add these to the Revenue figure for the combined company and then assume a certain margin on the Revenue – this additional Revenue then flows through the rest of the combined Income Statement. Cost Synergies: Normally you reduce the combined COGS or Operating Expenses by this amount, which in turn boosts the combined Pre-Tax Income and thus Net Income, raising the EPS and making the deal more accretive.

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