Definition for : Synergy

Synergy is the improvement of a Risk/Return ratio of a company following the improvement of the quality of its Earnings as a result of a Merger/acquisition/Diversification move (creation of Barriers to entry, decrease of Risk of operating cash flows, etc). There are commercial synergies, industrial synergies, and administrative synergies (it should be noted that financial synergies do not exist). Synergy results from a reduction in Charges or an improvement in Sales that leads to the Value of the whole being greater than the sum of the Values of the parts.

(See Chapters Chapter 32 Capital structure and the theory of perfect capital markets and Chapter 44 Initial public offerings (IPOs) of the Vernimmen)

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