When one company buys another, it’s a 1 + 1 = 3 deal because of synergies. The target company is worth more than its market cap (or estimated fair market value) because of what the acquirer can do with it. Of course, sellers know this and try to hike the price up to capture as much of that differential as possible. Historically, it’s been about a two-thirds-one-third split, with the buyers forking over about a third of the value of the synergies to sellers. But this split is now about 50-50, and a new study from MARKABLES confirms this.

New study: A MARKABLES analysis of data from 605 public takeovers between 2010 and 2022 finds that the buyer gets between 56% and 58% of synergies, depending on the calculation method. This confirms findings in similar research done by the Boston Consulting Group. This is all discussed in an article, “Synergies in Accounting and Valuation,” by Christof Binder, co-founder of the MARKABLES database. The article is available if you click here.

This interesting article provides insights and empirical data on how synergies are viewed, quantified, and used today across different groups of stakeholders. It also discusses the current initiative of the International Accounting Standards Board (IASB) to improve disclosures about synergy.