M&A - The Importance of Synergies in M&A processes 

Companies that acquire others can incur basically two types of Synergies. These synergies can be  offensive and defensive.

Offensive Synergies

The offensive synergies are those resulting from the Clients and Markets in which the companies operate (acquirer and acquiree).

Offensive synergies can occur:

- Sale of Products of the acquired company in the acquirer's markets.

- Sale of the acquirer's Products in the acquiree's markets.

Example: Purchase of the Cremogema brand by Refinações de Milho Brasil.

Refinações, which sold Mazola, Maizena, Knorr oil, among others, added a huge number of customers to the  acquired company Cremogema, as Cremogema became part of the price list of Refinações de Milho Brasil.

The increase in sales that occurred due to the fact that the product was offered to a much larger list of customers characterizes a case of Offensive Synergy

Some synergy also occurred due to the Cremogema customers base, which started to acquire the  buyer product  line.

This is a classic case of Sales Increase through Synergy.

Defensive Synergies

Defensive synergies result from structures that two companies have in common.

Example: 

The acquired company has  HR department with 3 employees. The acquiring company will incorporate just one person into its HR team, eliminating the positions of 2 people.

The costs that would be eliminated for these two people is a case of Defensive Synergy.

Effects on the Evaluation

Offensive and Defensive synergies can make possible to acquire a company. 

They need to be very well identified and their effects quantified. 

These effects may be considered in the Evaluation calculations by the acquirer.