When modeling an add-on acquisition, which steps help ensure synergies are realistic?

• A. Rely on basic synergies without validation.
• B. Assume all synergies will occur.
• C. Ignore integration risks and focus only on deal price.
• D. Project incremental revenue from cross-sell and market expansion; estimate cost savings from procurement, headcount optimization, and shared services; validate with integration plans, track-records, and credible timing.

Answer: (D)

When modeling an add-on acquisition, you want a realistic view of synergies by combining revenue growth opportunities with concrete cost savings, all tied to how the integration will actually unfold. Project incremental revenue from cross-sell and market expansion, and estimate cost savings from procurement, headcount optimization, and shared services. Validate these projections with integration plans, credible track records, and timing that reflects execution feasibility. This validation grounds the numbers in what can realistically be achieved, avoids over-optimistic assumptions, and supports more accurate valuation and post-close planning. Without validation or with optimistic guarantees that all synergies will occur, the model becomes unreliable and can mislead decision-making.