Corporate synergy is achieved through intercompany mergers or acquisitions, resulting in increased efficiency and cost reduction. However, the newly formed company may lose market value if investors perceive weakness. Synergy can be achieved through a smaller workforce, resource consolidation, and complementary products or services. Brand expansion is a beneficial aspect of corporate synergy.
Corporate synergy occurs when two companies become one through an intercompany merger or by one company acquiring another. The resulting gain in efficiency and cost reduction is the synergy that the newly formed company hopes to achieve. In most cases, even a merger has one company that is in a stronger position and looking to get the most out of merging with the other company. What the new company gains in corporate synergy may lose in market value if investors feel it has been weakened by the merger.
The basic idea among corporate synergy is that two companies can come together to form something greater than what they achieved as individual entities. On some occasions, two companies may be coming together for mutual benefit, and both come from a position of strength. More often than not, one or both companies may be struggling a bit on their own, and the synergy you gain may be the byproduct of a business move necessary for survival.
There are many ways a newly merged company can achieve corporate synergy that streamlines daily operations and strengthens the bottom line. The most obvious way is through a smaller workforce, created by laying off a part of the workforce now seen as unnecessary. Costs are also reduced by combining the resources owned by the two companies, reducing the need for the merged company to seek expensive outside help.
Another way to achieve corporate synergy is if the two companies being combined complement each other. This can occur when a company that produces a certain product merges with a company that has a strong distribution element. Perhaps a company that has national exposure could merge with one that has an international reach, thus expanding business opportunities. Synergy is achieved whenever the new company realizes some benefit that it could not have achieved without the merger.
Brand expansion is perhaps the most beneficial aspect of corporate synergy from a marketing standpoint. Anytime a company is able to gain exposure to a larger portion of its potential clientele than it could have in the past, it’s usually a positive turn of events, and news of a merger can often create that outcome. This can help offset any perceived weakness from market forces that might be associated with the new business.
Smart Asset.
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