Will the synergies actually cover the premium?
Synergy cases fail on three things at once: how much lands, how long it takes to get there, and what integration really costs. A bridge with one number per line invites the answer "we will manage it". Move all three and the finding becomes a probability the case clears the premium, with the driver ranked.
Finance Advanced Monte Carlo Pro engine
After you install, this is the model to open.
Will the Synergies Cover the Premium?
- In your spreadsheet, click the Sortia icon in the strip of icons down the right-hand edge. No strip? Click the arrow at the bottom-right to open it. You can also use Extensions, then Sortia, then Open Sortia.
- Click Start from a template and put that name in the search box.
- Pick the card with that name and click Load this template. It arrives on a new tab with real numbers already in it.
This one runs on a Pro engine, and every free install includes five full-quality runs on your own numbers, shared across all five Pro engines rather than five for each. After that, Pro is $199/year.
The answer
At the numbers management put in the room the case works, just: $42,607,403 against a $42,000,000 premium. Then 10,000 trials move the four things nobody can pin down.
- Mean net synergy value
- $31.0M against a $42M premium
- Chance it covers the premium
- 24% across 10,000 trials
- Top driver
- Revenue synergies ahead of realization and cost
- Cost synergies alone
- 0% never clears the premium
The management case clears the premium by $607K. The simulated case clears it 24% of the time, with a mean of $31.0M against a $42M premium. The tornado names the reason: the revenue synergy flag outranks everything else, and with revenue synergies forced off the deal never clears the premium in 10,000 trials, topping out near $35.2M. So the whole price rests on revenue synergies landing, which is the finding that changes a number or kills a transaction.
The model
The deal block, then a short calculation chain: realization is applied to both claimed synergy lines, the combined run rate is capitalized, that value is discounted for the delay to full run rate, and the one-time integration cost comes off.
| Premium paid over standalone value | $42,000,000 |
| Claimed run-rate cost synergies | $9,000,000 |
| Claimed run-rate revenue synergies | $6,000,000 |
| Realization factor | 45% - 70% - 90% (uncertain) |
| Months to full run rate | 9 - 18 - 30 (uncertain) |
| One-time integration cost | $8M - $12M - $22M (uncertain) |
| Revenue synergies land at all | 55% yes / 45% no (uncertain) |
| Capitalization multiple | 6.0x |
| Net synergy value | simulated |
Once it is in your sheet
- The model arrives with real numbers in it and runs as it stands, so you can press the button first and understand it second.
- Change the numbers to yours. The sheet marks which cells are inputs and which hold formulas, and most labels carry a note explaining the row.
- Press the run button at the bottom of the panel. It is labeled for the tool you are in, and the result lands on its own tab, with a written reading of it beside the figures.
Never used Google Sheets? Start here goes the whole way, in seven steps, and assumes nothing.
Next question
- Can you afford the hiring plan?Can We Afford This Hiring Plan?
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- What does ignoring correlation cost you?
- Do your two holdings actually diversify each other?How Two Assets Move Together
- Will you run out of cash this quarter?Will the Cash Last Thirteen Weeks?
- What are the odds you breach the covenant?How Close Is the Covenant?
Every model like this one, and the method behind them: Monte Carlo simulation.