Synergies

Question 1

Should you estimate revenue synergies based on the seller’s customers and the seller’s financials, or the buyer’s customers and the buyer’s financials

Answer 1

Either.
Could assume that buyer leverages seller’s products and sells them to own customer base, but also could assume an uplift to seller’s average selling price, or something else buyer can do with seller’s existing customers
- 2nd more common, as buyer is larger company can make more of an immediate impact on the seller than seller can on buyer

Question 2

Some examples of calculating expense synergies

Answer 2

• normal cost minus number of employees x average salary, benefits and other compensation expenses.
• if 2 mid buildings change to one larger one, new lease expense - old separate lease expenses = cost savings
• if building owned, money from selling or leasing

Question 3

What if there are CapEx synergies? For example, what if the buyer can reduce its CapEx spending because of certain assets the seller owns?

Answer 3

Start recording a lower CapEx charge on the combined CFS, then reflect a reduced depreciation charge on the IS from that new CapEx spending each year