Yep, I admit it's ridiciously expensive, so obviously it's not for ordinary users just like certain IB reports..... Come form the so-called M&A bible textbook: Applied Mergers and Acquisitions by Robert Bruner (2004), John Wiley & Sons. Synergy Earnout Exchange ratio boundary acquisition accouting LBO ..... e.g. Copyright © 2003 by Robert F. Bruner. All rights reserved. Use is subject to the terms and conditions given on the "Intro" page. Cost Synergies Year 0 1 2 3 4 5 1 Pre-Tax Cost Savings, Constant Dollars $ 50 $ 100 $ 100 $ 100 $ 100 2 Expected Inflation Rate 2% 2% 2% 2% 2% 3 Growth Rate of FCF (nominal), in perpetuity 2% 4 Discount Rate 6% 5 Ongoing Investment/Savings (year 3+) 5% 6 Pre-Tax Cost Savings, Current Dollars $ 51 $ 104 $ 106 $ 108 $ 110 7 Tax Expense (@ .40) (20) (42) (42) (43) (44) 8 After-Tax Cost Savings 31 62 64 65 66 9 Less: Investment Necessary to Realize the Savings $ (1,000) (5) (5) (6) 10 Plus: Disinvestment Associated with the Savings 20 20 10 - - 11 Subtotal (1,000) 51 82 68 60 61 12 Terminal Value 1,548 13 Free Cash Flow $ (1,000) $ 51 $ 82 $ 68 $ 60 $ 1,609 14 Net Present Value of Cost Savings $428 15 Internal Rate of Return of Synergy Investment 15%