Doubts

Exercise set 7 – Synergies

Exercise set 7 – Synergies

by Frederik Augustyniak -
Number of replies: 2

Hi all, 

I’ve just tried to solve this exercise and found that the solution is a bit confusing as:

  1. The sales uplift (+10 %) is valued at the new 40 % gross margin, over-estimating this lever
  2. The gross margin uplift is applied only to the old sales, under-estimating this lever
  3. The relative shares of the 3 synergies are not corrected for the tax effect, hence the “percentage breakdown across the three different levers” is wrong

This would be my idea, which I believe provides a clean split (see screenshot). 

Hope this helps – feedback welcome!





In reply to Frederik Augustyniak

Re: Exercise set 7 – Synergies

by Beatriz Rodrigues e Melo -
Hi Frederik,

I was now going to ask a question about this exercise, because I also found the points you mentioned confusing. This post helped a lot :)

Thank you!
In reply to Frederik Augustyniak

Re: Exercise set 7 – Synergies

by Julio Crego -
Dear Frederik, 

It is not a very important issue, but I understand your logic. The total synergies have to be the same. 

I would call the first one Increase in sales and the second gross profits (instead of the names in the solutions) but given that the names are not provided in the exercise, your answer will be correct. 

Best