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CS Professional · Strategic Management and Corporate Finance · Managing the Multi-Business Firm and Analyzing Strategic Edge

Which statement about synergy in a multi-business firm is most accurate?

Synergy is realised only when the combined value exceeds the sum of standalone values after deducting integration costs. Common ownership does not guarantee it, and it can come from revenue gains as well as cost savings.

  1. ASynergy is guaranteed once two businesses share the same parent
  2. BSynergy is realised only when the combined value exceeds the sum of the standalone values after allowing for integration costsCorrect
  3. CSynergy exists only when the businesses are in the same industry
  4. DSynergy arises only from cost reduction and never from revenue growth

Explanation

Synergy means the whole is worth more than the parts (the 2+2=5 idea), net of costs of achieving it. It is not automatic, can arise in related or unrelated settings, and can come from revenue enhancement as well as cost savings.

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