TABLE OF CONTENT Different types of synergies............................................................................................................1 REFERENCES...............................................................................................................................1
Different types of synergies There are three types of synergies which are as follows: Financial:It is the result of low capital cost and mergers can provide an effective solution to grow with more assets and higher debt capacity. Unrelated mergers can minimise risks by enhancing diversification. The development of internal capital market can also lower cost by efficient allocation. However there are very limited evidence of risk reduction from merger. Thus instead of financial mergers operating synergies are considered as key factor for creating mergers. Managerial:This synergy emphasises that if management team is not efficient then it will be easilyandquicklyreplacedbyteamsofotherorganisation.(TantaloandPriem,2016) Managerial synergy forms the basis for corporate acquisitions however in mergers it results in low disciplinary forces. Due to this reason another appropriate synergy called operational is used. Operational:It includes economies of scale which describes per unit production cost depends upon size of organisation. The scale and size of company and outputs play key role in this synergy.Itdirectlyreducestheadministrative,salesandotherorganisationalexpenses. Economises of scale also affect operational efficiency, research and development, supply chain transaction costs. The scaling offers a great advantage to ensure the optimised utilisation of resources (Haskel and Westlake, 2018). This synergy depends upon physical consolidation of operations and hence is influenced by cost structure of companies. It becomes more prominent in production or manufacturing based industries in which similarity of operations make it more easy and convenient to realise the cost minimising synergies. REFERENCES Books and Journals Haskel, J. and Westlake, S., 2018.Capitalism without capital: the rise of the intangible economy. Princeton University Press. Tantalo, C. and Priem, R.L., 2016. Value creation through stakeholder synergy.Strategic Management Journal.37(2). pp.314-329. 1
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