When two companies merge, they often become synergistic by virtue of generating more revenues than the two independent companies could produce on their own. The smaller company has qualified personnel, marketing tools, and experience in selling their products that can help the larger IT company boost its public image and formulate new marketing strategies to win more customers. These synergies include information campaigns, marketing tools, research and development, as well as marketing personnel.įor example, an IT company may acquire a smaller IT company that lacks infrastructure but has a strong marketing and PR department. Marketing synergy refers to the marketing benefits that two parties in an M&A transaction may enjoy when promoting their products and services. The following are the main types of synergies that corporations enjoy: Marketing synergy The synergistic effect of such transactions often forms the basis of the negotiations between the seller and the buyer. Types of synergistic effectsĬorporate synergy refers to the benefits that two firms are expected to gain when they merge or when one firm acquires another. The expected synergy is measured in terms of the potential to increase revenues, add technology, or to reduce costs. The potential synergy is considered when two companies are planning to merge or a large company is planning to acquire its smaller competitor and thereby increase the efficiency of its operations. The term is mostly used in mergers and acquisitions (M&A), where two companies merge to form one company that can generate more revenues or streamline the two companies’ operations and save on costs. The term synergistic is derived from synergy, which refers to the benefit that results from the merger of two agents who want to achieve something that neither of them would be able to achieve on their own.
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