What is synergy?

In business the term synergy is often associated with the merger or acquisition of companies.  Synergy implies that the outcomes resulting from the merger of two companies will be greater than the sum of the outcomes that would have been achieved if the organizations had not merged. Synergy is sometimes described as 1 + 1 = 3.

Let's use an example. Suppose a company operates solely in the U.S. Another company operates in Asia. The two companies decide to merge because they believe the combined company will have greater results than the total of the two companies operating independently. The synergy might come from shared research, ability to meet the needs of each other's customers, ability to attract new customers that want a single global supplier, elimination of duplicate information technology, and so on.

Synergy is not automatic since the merging organizations may experience problems caused by vastly different leadership styles and company cultures.