You are Fernando Aguirre-Salcedo, CEO of Ibérica Industrial. You want to buy a competitor and the board is thrilled with the "strategic logic." The banker proposes a generous premium to secure the deal. You have a colder question: where exactly does the value come from —and for whom?
The situation
The target is worth €10,000M on its own. Buying it requires paying a premium over that value. The key question in every acquisition: do the synergies you'll actually capture cover the premium you pay? Because the premium goes entirely to the seller; the buyer only creates value if synergies exceed the premium.
And not all synergies are equal. Cost synergies (closing duplicate plants, joint purchasing) are hard and predictable: you estimate €2,500M. Revenue synergies (selling more through the other's channel) are soft and rarely materialize: of €1,500M gross, risk-adjusted they come to ~€500M. Realizable total: €3,000M. Daimler-Chrysler paid for synergies that never appeared and destroyed value; P&G-Gillette stayed disciplined on cost synergies and created it.