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synergy

Companies often combine because they have overlapping areas that can benefit from the new partnership. This might be complementary technology or geographical footprints that would allow the companies to increase their revenues if they combined. They could also be areas where duplicate costs could be eliminated: for example, one company only really needs one head office and the marketing budget for one large brand could be lower than for two smaller brands. The former are called “revenue synergies”, while the latter are called “cost synergies”, e.g. they decrease costs (as opposed to boosting revenue).

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