How Merger Models Incorporate Managerial Accounting Methodologies

2023 Words Dec 8th, 2014 9 Pages
Cost Synergies: How Merger Models Incorporate Managerial Accounting Methodologies

According to the Merriam-Webster online dictionary, a synergy is defined as “a mutually advantageous conjunction or compatibility of distinct business participants or elements (as resources or efforts)”. When applied exclusively in a business context, synergies are realized improvements in efficiency, as well as reductions in cost, resulting from the cooperation of two or more entities. These improvements are derived from the elimination, and consolidation, of redundant activities and tasks between the operations of disparate business units. In the following paragraphs, I will describe how and when synergies are used to initiate certain business transactions, as well as how the synergy concept borrows from several well-established managerial accounting methodologies to achieve the aforementioned performance enhancements. Furthermore, I will detail the history of the synergy model’s acceptance as the preferred method for justifying decisions to alter the organizational structure through acquisition, merger, or divestiture. Synergy models used in this capacity function as planning tools that help managers forecast business unit performance following strategic realignments of operating resources. As companies have become more concerned with the incremental effects of acquisitive transactions on the “bottom line”, synergy models have grown to encompass more than just the financial…
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