What is a common definition of cost synergies?

Cost synergies refer specifically to the efficiencies gained through the combination of two or more entities, particularly when it comes to reducing operational expenses. When companies merge or acquire one another, they often aim to eliminate redundancies—such as overlapping functions, departments, or facilities—which can lead to significant savings. This is realized through actions such as consolidating administrative functions, renegotiating supplier contracts, and optimizing workforce structures.

In contrast, the other options relate to different aspects of a business merger. Increased revenue from combined entities focuses on growth opportunities and sales enhancement following a merger, which falls under revenue synergies rather than cost synergies. Enhancement of brand recognition and increased market share are also advantages of mergers but do not directly relate to the concept of cost savings or efficiencies. Therefore, the correct definition of cost synergies is aptly described by the reduction in operating costs from consolidation.