Synergy And Corporate Synergies And Financial Synergies Essay

Synergy And Corporate Synergies And Financial Synergies Essay

Length: 1010 words (2.9 double-spaced pages)

Rating: Better Essays

Open Document

Essay Preview

According to Thompson (2001) Synergy refers to extra value or extra benefits which appealingly is accumulated from the connection or a mixture of the two businesses, or from addition co-operation either between separate portions of the same company or between a company with its suppliers, distributors and customers. In-house co-operation may be helpful as a connection between both different work and performances, or it can be plainly be used to calculate beneficial synergy which would create the “2+2 = 5” aftermath which means that the companies are capable to increase value while joining its product-market posture. Or, two firms may be joined and a benefit may end up from synergistic to supply a cost above that of the current cost of the two liberated cash flows which symbolizes by discounted cash flow of company A, and also discounted cash flow of company B plus achieving balanced to discount cash flow of the merged firm. Also, Synergy could be divided into two different types, which is operating synergies and financial synergies.
Functioning synergies are those synergies that lets firms to develop their functioning performance and to expand the progress and development of the company in four different ways. First of all, economies of scale that may or may not appear from the merger, it lets the combined firm to be more profitable. Second of all, a higher pricing power from decreasing the competition and higher market share which could assist the company in a larger margin and operating income. Then, combination of separate working strengths from two companies could push up the operation efficiency. Last but not least, the combined firm would have higher growth in the new or existing markets with established distribution network...


... middle of paper ...


...return. However, this method can likewise be use by the target company to compute how much the premium should acquiring company may compensate for them. The premium would boost the cost for acquiring company to purchase the target company to take control. Also, the premium will deduct the synergy value and should be taken away from the calculated synergy value.
To sum up, the event study method, the contrast between the actual return and the above approximate return symbolizes an investment’s abnormal return. It calculates how the company acts over time and it is a well-known valuation method to examine if the merger and acquisition is useful or not. But this method did not consider some factors such as change in organisation structure and the working habitat but those factors will influence the cost of synergy and functioning effectiveness in different departments.

Need Writing Help?

Get feedback on grammar, clarity, concision and logic instantly.

Check your paper »

Mergers, Acquisitons and Corporate Restructuring Essay

- Mergers Acquisitions & Corporate Restructuring – Project Report Executive Summary Mahindra & Mahindra Ltd. (M&M), of the $16.2 billion Mahindra group, entered into an agreement with the ailing Ssangyong Motor Company (SYMC) to acquire a majority stake on 2nd August 2010. The deal was done to allow Ssangyong Motor Company to strengthen their Research & Development, increase business competitiveness, and encourage investments in product development and to increase their global sales with the help of a partner (Mahindra & Mahindra) with strong financial capability and business engagements in diverse markets....   [tags: project report, Mahindra & Mahindra Ltd.]

Better Essays
1433 words (4.1 pages)

Essay on Achieving Synergy In Small Groups

- Synergy comes from the Greek word sunergos which means “working together” (Morris, 1981). Synergy results from two or more people working together, sharing ideas with open minds and mutual respect, and managing conflict in ways that empower all members. This is the advantage of working in a group: the whole group is greater than the sum of its parts. (Harris and Sherblom, 2005, p.11) Synergy consists of two aspects: problem solving and interpersonal relations. (Adult Learners Guide, p.13) An in-class exercise served to illustrate the concept of synergy and how sharing other peoples ideas and working together produces better ideas to those of any one group member working alone....   [tags: Teamwork Synergy, Small Group Performance]

Better Essays
991 words (2.8 pages)

Corporate Finance And Financial Manager Role Essay

- Corporate Finance and Financial Manager Role Over time, every business finds that while it has attempted to make the best decisions for its success, sometimes the right choices were made and sometimes the wrong decisions were made. Having said that business decisions are important and could succeed in the business world if they answer for themselves questions like: how can we define if we are doing well in our business. Or what are the best options and decisions. Are we generating profit or loss....   [tags: Finance, Corporate finance, Investment, Debt]

Better Essays
725 words (2.1 pages)

Relationship Between Corporate Social Responsibility And Financial Performance

- In recent years, more people begin to accept the concept of corporate social responsibility. Companies also pay more attention to the activities of CSR and investment. In addition to face the pressure of the environment and the social moral level, the enterprise managers also have the responsibility of the company 's performance and the value of the shareholder 's wealth. Therefore, enterprises need to pay more attention to the relationship between corporate social responsibility and financial performance....   [tags: Corporate social responsibility]

Better Essays
735 words (2.1 pages)

Financial Management And Corporate Finance Essay

- Over the years corporations have aimed to gain huge profits by means of maximizing investments contributed by shareholders. In relation to shareholders value as it relates to corporate finance, the main idea is to maximize shareholders value. This is derived by implementing measures to get competitive advantages in industries of which companies operate. These measures and procedures include the raising of funds, investing, handling perceived risk and anticipating required return. Maximizing shareholders value make sense because this increase the value of a corporation, increases shareholder’s investments, and stabilizes the economy....   [tags: Investment, Finance, Net present value]

Better Essays
1013 words (2.9 pages)

Financial Analysis : Financial Management Essay

- In the context of financial innovations, I have witnessed so many ups and downs in China’s financial community. Tianhong Asset Management which is affiliated with Alibaba has become the largest fund company in China within one year while Ezubao, an A2P platform for financing, leasing and equity transfer, was accused of illegal fund-raising. This makes me constantly reflect on the defects of China’s financial market. Through years of financial education in the UK, I have gradually realized compared with developed countries, China’s financial market is extremely vulnerable to unsound financial regulations....   [tags: Corporate finance, Finance, Risk]

Better Essays
934 words (2.7 pages)

Corporate Fraud Is A Serious Financial Problem Essay

- 1.Introduction Corporate fraud is a serious financial problem which attracted global attention of how banks enhancing their ability to corporate with those fraudulent enterprises. There are many instance in the world such Enron Corporation and WorldCom case. In China, there are increasing instances of corporate fraud emerged, where the capital market has been intensively impacted. About one-fifth of Chinese firms have been punished by China Securities Regulatory Commission (CSRC) for financial fraudulent behaviors....   [tags: Debt, Loan, Stock market, Interest]

Better Essays
1456 words (4.2 pages)

Essay on Corporate Governance in the Financial Service Industry

- Introduction This essay is about the corporate governance, regulation, leverage and incentives in the financial service industry. This essay also includes the UK credit crunch crisis and the global economic crisis. The UK economy is in recession. Due to fall in demand for goods and services reduce production and unemployment increases. A fall in demand has an effect on industries. In some case firms close down and loss of job increase. The world has become a small village due to the internet, leading to world competition....   [tags: UK Economy]

Better Essays
2151 words (6.1 pages)

The Corporate Governance Of India Essay

- Introduction: Corporate Governance deals with a set of rules and regulations that are prescribed for directing the company’s affairs. It controls a company or an organization by ethics, values, principles etc. The board of directors of the company is responsible in ensuring effective corporate governance by working for the company’s interest in the broad sense. Corporate governance took its initial phase in India during the economic liberalization in 1996 and the need for corporate governance increased with the changing business environments all over the world....   [tags: Corporate governance, Corporation, Governance]

Better Essays
757 words (2.2 pages)

Corporate Compliance Report Essay

- Introduction Corporate governance can be thought of as the overall umbrella of control and direction under which a corporation operates. Enterprise Risk Management (ERM) is "a process, effected by an entity's board of directors, management and other personnel, applied in strategy setting and across the enterprise, designed to identify potential events that may affect the entity, and manage risks to be within its risk appetite, to provide reasonable assurance regarding the achievement of entity objectives," (BusinessDictionary.com, 2008)....   [tags: Corporate Governance]

Free Essays
1765 words (5 pages)