The higher reinvestment rate pushes up expected growth
during the high-growth period and generates a value for
synergy of $24.02 million.
Finally,assumethatthesynergytakestheformofstrategic
barrierstoentrythatwillkeepcompetitionoutforalonger
period,thoughthereturnoncapitalandreinvestmentratedo
not change during the period. In the following table, we
estimatethevalueofsynergyfromextendingtheperioduntil
thecompanywillbecomeastable-growthcompanyfrom 5 to
10 years:
The value of synergy from being able to sustain excess
returns for a longer period is $45.72 million.
ILLUSTRATION15.3:ValuingCostandGrowthSynergies:
Procter & Gamble and Gillette
To consider valuing synergy in the more complicated
real-worldscenariowheretherearemanypossiblesourcesof
synergy,welookatProcter&Gamble(P&G)’sacquisitionof
Gillettein2004.Tovaluesynergy,wefirstvaluedP&Gasa
stand-alone firm, with the following assumptions.