synergies

Question 1

what is synergy?

Answer 1

the value of 2 business brought together is higher than the value of the 2 individual businesses

Question 2

what are the 2 sources of synergy

Answer 2

cost savings
revenue synergy

Question 3

What is cost savings

Answer 3

when they combine there is a reduction in costs, better deal from suppliers and no duplicated functions

Question 4

what is revenue synergy

Answer 4

when they combine revenues increase, new distribution channels, new markets

Question 5

cost savings example

Answer 5

Exxon and Mobil
Sold overlapping assets such as refineries and service stations

Question 6

Revenue example

Answer 6

Disney and Pixar
Could use their characters in theme parks and merchandise

Question 7

what are the benefits to a business

Answer 7

cost savings, selling assets can increase capacity utilisation, can help cashflow
Revenue.. wider target market.. increased sales and revenue and then can be reinvested into staff