What does the term "synergy" refer to in M and A?

The term "synergy" in the context of mergers and acquisitions (M&A) refers specifically to the potential financial benefits gained from the combination of two companies. When two firms merge, they can achieve economies of scale, better efficiencies, or an expanded market presence that enhances their overall performance and profitability.

This concept encompasses various advantages, such as cost reductions through streamlined operations, increased revenue through a more diverse product offering, or enhanced competitive positioning in the market. Essentially, synergy suggests that the combined value and performance of two firms post-merger exceed the sum of their separate individual values.

In contrast, the other choices focus on different aspects of business operations that do not encapsulate the essence of synergy in M&A. For instance, active marketing pertains more to promotional strategies than the overall financial benefits of a merger. Likewise, a payment system and organizational structure are operational frameworks rather than direct financial outcomes arising from the merger itself. Therefore, identifying the potential financial benefit from the combination of two companies as defining synergy captures the core essence of the term in the context of M&A.