Sample Essay

Synergy and Benefits to Merging Companies

The primary motive behind a merger is the creation of synergy which means creating a value much larger than the value of two companies combined. If a company is worth 100 million and another company is worth 50 million there combined value would be 150 million and if they merge they could increase the value to 170 million and this would be the resulting synergy from a merger. This is the basic motive of a merger where the two companies can not only increase their combined values but also take advantage of individual benefits. This synergy is based on the concept of one plus one equals three which entails that when two companies merge the combined value should be greater than the sum of their individual values. If this synergy is not achieved a merger is useless. The synergy from the mergers should be higher with a fact that the merger should also include added individual benefits for each merging company as well.

When British Airways and Qantas merge the companies would not only benefit individually but the combined strength and value of the two companies would enable the new merged organisation to take advantage of monopolistic conditions. When two companies merge or when one company is acquired by another company the competition between these two companies is basically eliminated and individual efforts of the management of both companies now combine to achieve a common goal or objective.

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