Short definition: Synergy refers to the concept that the combined value and performance of two or more entities (such as companies or business units) will be greater than the sum of their individual parts.
Explanation: Synergy is often cited as a justification for mergers, acquisitions, and other forms of collaboration. It suggests that the combined entity can achieve benefits that would not be possible if the entities operated independently. These benefits can include cost savings, increased revenue, improved efficiency, and access to new markets or technologies.
Example: A merger between two companies might create synergies by eliminating duplicate functions, leveraging shared resources, and cross-selling products or services to each other’s customer base.
Additional information (optional): Synergy is often difficult to quantify and realize in practice. The success of achieving synergies depends on various factors, including the strategic fit between the entities, the integration process, and the ability to manage cultural differences.