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.

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."

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. Merger

    The combining of two or more companies, generally by offering ...
  4. Operating Expense

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

    The concept that the value and performance of two companies combined ...
  6. Asset Valuation Review (AVR)

    A process that establishes an estimate of the value of a failed ...
Related Articles
  1. Finding The Best Buyer For Your Small ...
    Entrepreneurship

    Finding The Best Buyer For Your Small ...

  2. Key Players In Mergers And Acquisitions
    Fundamental Analysis

    Key Players In Mergers And Acquisitions

  3. What Makes An M&A Deal Work?
    Options & Futures

    What Makes An M&A Deal Work?

  4. The Basics Of Mergers And Acquisitions
    Options & Futures

    The Basics Of Mergers And Acquisitions

Hot Definitions
  1. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  2. Leading Indicator

    A measurable economic factor that changes before the economy starts to follow a particular pattern or trend. Leading indicators ...
  3. Wage-Price Spiral

    A macroeconomic theory to explain the cause-and-effect relationship between rising wages and rising prices, or inflation. ...
  4. Accelerated Depreciation

    Any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years ...
  5. Call Risk

    The risk, faced by a holder of a callable bond, that a bond issuer will take advantage of the callable bond feature and redeem ...
  6. Parity Price

    When the price of an asset is directly linked to another price. Examples of parity price are: 1. Convertibles - the price ...
Trading Center