Synergies

The extra value two businesses are expected to create together beyond what each would earn alone. Cost synergies come from closing duplicate plants, offices and functions; revenue synergies come from selling more through the combined reach.

Cost synergies are the more dependable kind, because the acquirer controls them. Revenue synergies depend on customers behaving the way the deal presentation assumed, and they're the first to slip. Integration also costs money up front, often a year or more of the annual saving.

Now put numbers on it. An acquirer expecting ₹120 crore a year of after-tax cost savings, valued at ten times, is buying ₹1,200 crore of synergy value. If it pays a ₹1,500 crore premium over the target's market value, it has handed all of the synergies to the seller and ₹300 crore more. Unless revenue synergies arrive, the deal destroys value for its own shareholders.

Compare the premium with the likely synergies, not the promised ones.