Cost Synergy

AAA

DEFINITION of 'Cost Synergy'

In the context of mergers, cost synergy is the savings in operating costs expected after two companies that compliment each other's strengths join.

BREAKING DOWN 'Cost Synergy'

The savings in operating costs usually come in the form of laying off employees. Often this term is used in press releases to add a politically correct spin to bad news.

For example, the CEO might say "While these reductions and closures are difficult actions to take because of the employees involved, I am confident that we will achieve at least $10 million of synergies as a result."

RELATED TERMS
  1. Strategic Buyer

    A type of buyer in an acquisition that has a specific reason ...
  2. Congeneric Merger

    A type of merger where two companies are in the same or related ...
  3. Synergy

    The concept that the value and performance of two companies combined ...
  4. Operating Expense

    A category of expenditure that a business incurs as a result ...
  5. Merger

    The combining of two or more companies, generally by offering ...
  6. Weighted Average Cost Of Capital ...

    A calculation of a firm's cost of capital in which each category ...
Related Articles
  1. Stock Analysis

    Lockheed Martin to Buy Sikorsky. Is It the Right Move?

    Discover more information on the Lockheed Martin acquisition of Sikorsky, and learn why this move makes good strategic business sense for Lockheed.
  2. Entrepreneurship

    Finding The Best Buyer For Your Small Business

    Learn more about the process business owners go through to seal a merger or acquisition deal.
  3. Fundamental Analysis

    Key Players In Mergers And Acquisitions

    Strategic acquisition is becoming a part of doing business. Discover the different types of investor groups involved.
  4. Options & Futures

    What Makes An M&A Deal Work?

    Do you know why companies merge? Here we'll take a look at three successful company acquisitions and why they succeeded.
  5. Options & Futures

    The Basics Of Mergers And Acquisitions

    Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
  6. Stock Analysis

    Net Neutrality: Pros and Cons

    The fight over net neutrality has become an amazing spectacle. But at its core, it's yet another skirmish in cable television's war to remain relevant.
  7. Stock Analysis

    5 Reasons Thoratec Corp. Keeps Impressing Investors

    Learn about Thoratec Corporation and its position in its industry. Understand five key factors why the company has impressed investors.
  8. Entrepreneurship

    Top 5 Startups That Emerged in Boston

    Learn why Boston is a hot market for startups, and familiarize yourself with a few of the top startups that have emerged from the city.
  9. Entrepreneurship

    How to Prep Your Business for a Sale

    Once you have a clean, stand-alone business with solid finances, it's time to put a price on it. Here are the steps needed to prepare for a sale.
  10. Stock Analysis

    This Is Why Instagram Is Winning Over Flickr

    Learn about Instagram's and Flickr's business models. Understand why Instagram has been winning over Flickr and why that trend is likely to continue.
RELATED FAQS
  1. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  2. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  3. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  4. How is a tender offer used by an individual, group or company seeking to purchase ...

    A tender offer is made directly to shareholders in a publicly traded company to gain enough shares to force a sale of the ... Read Full Answer >>
  5. How does a company record profits using the equity method?

    A company that invests in another company and has majority control of it would record profits using the equity method. This ... Read Full Answer >>
  6. How does horizontal integration allow companies to share resources?

    In a horizontal integration, a company either acquires another company or merges with that company. This allows the resulting ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Bubble Theory

    A school of thought that believes that the prices of assets can temporarily rise far above their true values and that these ...
  2. Stock Market Crash

    A rapid and often unanticipated drop in stock prices. A stock market crash can be the result of major catastrophic events, ...
  3. Financial Crisis

    A situation in which the value of financial institutions or assets drops rapidly. A financial crisis is often associated ...
  4. Election Period

    The period of time during which an investor who owns an extendable or retractable bond must indicate to the issuer whether ...
  5. Shanghai Stock Exchange

    The largest stock exchange in mainland China, the Shanghai Stock Exchange is a nonprofit organization run by the China Securities ...
  6. Dead Cat Bounce

    A temporary recovery from a prolonged decline or bear market, followed by the continuation of the downtrend. A dead cat bounce ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!