Business Negotiations: When the Whole is Less than the Sum of the Parts

It’s an axiom of business that “the whole is greater than the sum of the parts.” Through the magic of synergy, a company can often create value by combining two or more things (e.g., businesses, products, marketing ideas) that interact positively and result in more than a purely additive outcome.

The same result can often be seen in business valuation. For example, two companies, each with $10 million in revenue and $2 million in earnings, might become more valuable simply by combining into a single company with $20 million in revenue and $4 million in earnings. (While there are a number of factors that make this true, a discussion of them will have to wait for a future post about business valuation.)

However, I believe that the way people handle business negotiations often results in “negative synergy,” where the whole becomes less than the sum of the parts. Read more