Synergies
Run-rate, phase-in, after tax.
By Surojit Chakraverti, founder of L3VLUP and an investor running a long-short healthcare and technology equities strategy.
On this subject: synergies.Updated 30 September 2026
What it does
Cost savings and, less credibly, revenue gains that exist only because the two companies are combined. They are stated as a pre-tax run-rate, realised over a phase-in schedule, and taxed before they reach net income. The most useful number is the breakeven: the run-rate at which the deal neither adds to nor dilutes earnings per share.
Where it lives
The same schedule in each model that carries it, with the rows to open. Open a model in the browser, go to the sheet, and click the lines.
- Assumptions, rows 33–34: Run-rate pre-tax cost synergies, Synergies realised, % of run-rate
- Pro Forma EPS, row 11: Synergies realised
- Pro Forma EPS, rows 16–18: Net pre-tax adjustments, Net after-tax adjustments
What a reviewer looks for
- Synergies added after tax as though they were net income.
- Full run-rate in year one.
- Revenue synergies counted at the revenue line rather than the margin they earn.
Learn it, then build it
Understand · Primer
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Accretion / Dilution Animator
Call a deal accretive or dilutive from P/E, premium and financing mix before you open a model.
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M&A Interview Questions: Accretion/Dilution and Beyond
Vocabulary: Synergies.