Case types

M&A cases: the deal only works if the synergies survive contact

You are not valuing the target, you are valuing the difference the deal makes. Synergies net of integration cost, against the premium you paid for them. Worked dialogue and a drill.

Updated Aug 2026By the CaseRound team

The short version

You are not valuing the target. In a competitive process the price usually already reflects what it is worth standalone, so what you are valuing is the difference the combination makes.
Turn the price into a multiple immediately. That is the bar every synergy has to clear.
Cost synergies are largely yours to execute. Revenue synergies need the customer to behave differently, so quote them separately and keep them out of the base case.
Net off integration before you quote a multiple, and answer with a price rather than a plain yes or no.

On this page

Three things, in this order
Cost synergies are real, revenue synergies are claims
What this sounds like
The number, and the shape of the answer
Where candidates lose these
Drill this
Frequently asked questions

An acquisition case hands you a buyer, a target and a question that sounds like "should they buy it?" Candidates answer by evaluating the target. Is it growing, is it profitable, is the management good, is the market attractive.

All of that is worth knowing and almost none of it decides the case. In a competitive process the price usually already reflects the target's standalone quality, though a bilateral, distressed or proprietary deal may not. A good company at a fair price creates nothing for the buyer. What creates value is the difference the combination makes, minus what it costs to make it, minus what you paid up front for the privilege.

So the question is not "is this a good company." It is "is this company worth more to us than to anyone else, by enough to cover the premium."

Three things, in this order

What is it worth on its own, and what are we paying? You need both, because the gap between them is the premium, and the premium is the bar everything else has to clear. If the case gives you a price and no valuation, ask what comparable businesses trade at.

What does the combination create? Cost synergies, revenue synergies, and anything strategic that is real rather than rhetorical. This is where the time goes.

What does it cost to get there, and what could go wrong? Integration spend, the time it takes, the customers and people who leave during it.

Cover all three up front, then declare where the time goes. But lead with what makes this combination specific rather than reciting the three: "the value here comes from network overlap" says the same thing and could not be handed in for a different deal.

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Cost synergies are real, revenue synergies are claims

This distinction is the most useful thing to carry into an acquisition case, and stating it early marks you out.

Cost synergies are largely within the buyer's control. Duplicate headquarters, overlapping sales coverage, procurement volume, one finance system instead of two. You can name them, size them roughly, and they are the ones most likely to actually land, though commonly later and smaller than the deal model assumed.

Revenue synergies require customers to behave differently. Cross-selling the target's product to your customers assumes your customers want it and your sales force can sell it. These are the ones most often reported as falling short of the deal model, and treating them with visible skepticism is a signal of judgment, not pessimism.

The move is not to ignore revenue synergies. It is to separate them, size them, and say plainly which part of your recommendation survives if they never arrive.

What this sounds like

InterviewerOur client is a mid-size logistics company doing about 800 million in revenue. They are looking at acquiring a regional competitor with 200 million in revenue. The asking price is 300 million. Should they do it?

CandidateTwo logistics networks in the same country is a combination where the value, if there is any, comes from the overlap: the same lanes, the same depots, the same trucks running fuller. So while I need the standalone value against the 300 we would pay, and I need to know what the integration costs, the question that decides this is how much the two networks actually overlap. That is where I want the time. First, do we know what the target earns?

InterviewerAbout 20 million in operating profit.

CandidateSo we are paying 300 for 20 million of profit, which is 15 times operating profit. Whether that is rich depends on the sector, but for a regional logistics business that feels full rather than cheap. Let me set it up as: at 15 times, the deal needs to either grow that 20 or add to it through the combination. So what does combining two logistics networks create? Cost side, I would look at overlapping depots and routes, back office, and purchasing, mostly fuel and fleet. Revenue side, whether the target's customers buy services we have and they do not, and whether the combined network can serve national accounts neither of us can win alone.

InterviewerThe two networks overlap in about a third of their depots.

CandidateThat is the number that matters most so far. Let me reason before calculating. If a third of depots overlap, we can probably close most of the duplicated ones and keep the volume, because logistics depots have real fixed costs and spare capacity. I would assume depot overhead runs at roughly 15 percent of the target's revenue, and that we capture about half the overlap in the first two years. On those two assumptions the synergy should land in the mid single-digit millions. Shall I run it?

InterviewerGo ahead.

CandidateFifteen percent of 200 million is 30 million a year of depot overhead, a third of it sits in overlapping locations, so 10 million, of which we capture half. Call it 5 million of annual cost synergy, possibly more with routing density. Against 20 million of existing profit that is a 25 percent uplift, which is material.

InterviewerThe client also believes they can cross-sell their temperature-controlled service to the target's customers, worth maybe 8 million of profit.

CandidateI would treat that differently from the 5. The depot saving is something we decide to do. The 8 million requires the target's customers to buy a service they currently do not, from a company that has just been acquired, which is the moment they are most likely to test the market. So I would carry it as an upside case rather than in the base. And before I quote a multiple I should net off integration, which I have not touched yet. Closing depots, harmonizing systems and holding on to drivers all cost real money in the first year or two. A rough rule I would want checked is that integration eats about a year of the synergy, so call it 5 million once. That does not change the run rate but it pushes the payback out by a year. So my base is 20 plus 5, which is 25 million of run-rate profit against 300 paid, or 12 times, with a year of that synergy consumed on the way. Better than 15, still not cheap. With the cross-sell it would be 33 million and about 9 times.

InterviewerSo what is your recommendation?

CandidateProceed, but not at 300 unless something else changes. The cost synergies alone do not make 300 compelling, and the revenue synergies are the seller's argument for the price, not ours. What I would want before naming a counter is what comparable regional logistics businesses have traded at, because that is the only thing that turns "12 times feels full" into a number. If comparables sit nearer 10 times, then 25 million of profit supports about 250, and that is the offer. If they sit nearer 12, then 300 is simply the market price and the question becomes whether we want it at market. If the price is fixed at 300, the deal depends entirely on the cross-sell, and before committing I would want evidence: what share of our own customers buy the temperature-controlled service, and how similar the target's customer base is to ours. If our own attach rate is 30 percent and their customers look like ours, the 8 million becomes credible. If our attach rate is 5 percent, the deal does not work.

The candidate did three things a template does not produce. They converted the price into a multiple immediately, they netted integration off before quoting that multiple rather than after being asked, and they refused to put the revenue synergy in the base case while naming the specific evidence that would move it there.

The number, and the shape of the answer

The arithmetic of an acquisition case is short:

Target's standalone profit, and the price as a multiple of it.
Plus cost synergies you would actually execute.
Minus a year or so of integration cost.
Revenue synergies quoted separately, never blended in.

Then the recommendation has a shape rather than a direction: yes at this price, yes at a lower price, or yes only if this specific fact turns out to be true. Interviewers reward the conditional because it is what the answer really is.

Where candidates lose these

Valuing the target instead of the deal. A thorough analysis of a company you are buying at a fair price can conclude nothing.

Blending revenue synergies into the base. It makes every deal work and tells the interviewer you have not seen one fail.

Forgetting the premium. Synergies of 5 million are excellent if you paid nothing for them and irrelevant if the price already includes 50 million of them.

Ignoring integration entirely. It is the cost most often left out of a case answer entirely, and the one candidates underestimate when they do include it. Culture belongs here too and is even easier to skip: two sales forces on different incentives, or a founder-run target absorbed into a process-run buyer, is how a synergy that was real on paper fails to arrive.

Only answering yes or no. Price is a variable. "Yes at 250" is a better answer than "no at 300" and shows you understood what was actually being decided.

Drill this

Fifteen minutes, out loud.

Pick two companies in the same industry that you know something about, one clearly larger.
Minutes 1 to 3: name the three areas, declare your weighting, and ask the two questions you would need to compute a multiple.
Minutes 4 to 6: invent a profit and a price. Say the multiple out loud and whether it feels full or cheap, and why.
Minutes 7 to 11: list cost synergies and revenue synergies in two separate columns. Size two cost items with rough percentages, explaining before calculating.
Minutes 12 to 13: subtract a year of integration cost and restate the multiple.
Minutes 14 to 15: give a conditional recommendation naming the price you would pay and the one fact that would let you pay more.

Force step four's two columns. The habit of physically separating what you control from what the customer controls is most of the judgment this case type tests.

Frequently asked questions

Do I need to know valuation methods?

For a case, a multiple of profit is almost always enough, and knowing that a discounted cash flow exists is enough theory. What matters is converting the price into a multiple fast so you have a reference for whether the synergies are big enough.

How do I size a synergy without data?

Take a share and apply a percentage, the same two-number move that ends most profitability cases. What share of the cost base does this category represent, and what fraction of it is genuinely duplicated. State both as assumptions and invite correction.

What if the case is a divestiture rather than an acquisition?

The logic inverts cleanly. What is the unit worth to us, what is it worth to the best buyer, and what stranded costs stay behind after it leaves. The stranded costs are the part candidates forget, and they are the equivalent of integration cost on the way out.

Should I always be skeptical of revenue synergies?

Skeptical, not dismissive. Separate them, size them, and name what evidence would make them credible. A candidate who dismisses them outright looks as rehearsed as one who counts them in full.

What if the interviewer will not give me a price?

Then build the multiple you would be willing to pay and say it. "At 20 million of profit plus 5 of synergy, I would go to about 10 times, so 250." That inverts the case into a valuation and is a stronger answer than declining to commit because a number was withheld.

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