Synergies
Definition
Synergies are the cost savings or revenue gains a buyer expects from combining two companies, value that exists only because of the merger. Cost synergies come from removing duplication; revenue synergies from cross-selling or pricing power.
In practice
Synergies justify premiums, and they are the most over-promised number in M&A. Cost synergies are usually real, if painful. Revenue synergies mostly are not. A useful rule from decades of deals: halve the revenue synergies, double the time, and see if the deal still works.