Calculate synergy from acquisition:
Assume that you are Best Buy, the electronics retailer, and that you would like to enter the hardware component of the market. You have been approached by investment bankers for Company X, which has a recognized brand name. Based on the below proposed breakdowns on benefits and costs, what will be the synergy for the acquisition? (please disregard the discount factor)
The total revenue of Best Buy and Company X will increase 4 million each year for the next 5 years from combing the two distribution channels.
The total revenue of Best Buy and Company X will increase 5 million each year for the next 5 years from tapping into different customer bases.
The total operation cost of Best Buy and Company X will reduce by 2 million each year for the next 5 years.
The cost to restructure the merged companies will be 10 million as a one-time cost.
The cost to complete the deal will be 3 million as a one-time cost.