Cost Synergy

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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.

INVESTOPEDIA EXPLAINS '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."

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