Purpose
Construct a step-by-step value bridge that reconciles a target's standalone value with the total price a buyer can defensibly pay — separating intrinsic value, revenue synergies, cost synergies, integration costs, and the control premium — and surface the single most important verdict: whether modeled synergies actually justify the premium being paid.
When to Use
Invoke this skill when the user asks to:
- Justify or pressure-test the price being paid for an acquisition target
- Build a value bridge or synergy waterfall for a board or investment committee deck
- Determine how much synergy is required to break even on a given offer price
- Compare an offer price against standalone value plus synergies net of costs
- Diagnose whether a deal is overpaying relative to achievable synergies
- Model best/base/worst synergy cases against a fixed purchase price
Inputs Required
Before starting, collect:
- Standalone target value: Intrinsic or market value of the target on a standalone basis (enterprise value preferred; specify equity vs. EV)
- Offer / purchase price: The price under consideration (enterprise value basis)
- Control premium: Premium over standalone, as a % or absolute dollar amount (if a market reference price exists, capture it)
- Revenue synergies: Incremental revenue and the associated margin, plus the year they ramp to run-rate
- Cost synergies: Annual run-rate cost savings (COGS, SG&A, overhead) and ramp timing
- Integration / one-time costs: Restructuring, systems, retention, advisory, and severance costs to capture synergies
- Valuation parameters: Synergy capitalization basis (run-rate × multiple, or NPV with discount rate and ramp), tax rate, and whether to phase synergies
If synergy capitalization basis is missing, default to NPV of after-tax synergies over a 5-year ramp at the buyer's WACC; state the discount rate and ramp assumption explicitly.
Instructions
Step 1: Establish the Standalone Anchor
Set the left-hand starting bar of the bridge.
- Confirm enterprise vs. equity value basis and hold it consistent across every bar
- State the standalone value and the methodology behind it (DCF, comps, market price) in one line
- If a public market reference price exists, note it so the control premium can be measured against an unaffected price
Step 2: Quantify Revenue Synergies
Value the incremental revenue, not just the top-line number.
- Apply the relevant contribution or EBITDA margin to incremental revenue — never capitalize gross revenue
- Phase to run-rate: apply a realization curve (e.g., 25% / 50% / 75% / 100% over years 1–4) unless the user supplies one
- Capitalize using the agreed basis: run-rate EBITDA contribution × multiple, or NPV of after-tax cash flows
- Apply a probability haircut for revenue synergies (default 50% realization confidence) — these are the least reliable synergy type and should be discounted accordingly
- Output: gross value, haircut, and net contribution to the bridge
Step 3: Quantify Cost Synergies
Value the run-rate savings net of the cost to achieve them.
- Capitalize after-tax run-rate savings on the same basis as revenue synergies
- Apply a realization curve and a lighter probability haircut (default 80% confidence) — cost synergies are more controllable than revenue synergies
- Separate clearly from integration costs (Step 4) — do not net them inside this bar
- Output: gross value, haircut, and net contribution to the bridge
Step 4: Subtract Integration and One-Time Costs
Deduct the cost of capturing synergies.
- Sum restructuring, severance, systems/IT integration, retention bonuses, and transaction/advisory costs
- Treat as a present-value cash outflow (after-tax where deductible) — these reduce the bridge as a negative bar
- Apply a common-sense ratio check: if total integration cost is below ~30% of year-1 gross cost synergies, flag the estimate as potentially optimistic
Step 5: Subtract the Control Premium
Show what the buyer is paying above standalone for control.
- Compute the control premium as offer price − standalone value (or unaffected market price)
- Express both in dollars and as a % of standalone value
- This is the negative bar that synergies must overcome to create value for the acquirer
Step 6: Compose the Bridge and Render the Verdict
Assemble the full waterfall and deliver the judgment.
Bridge equation: Standalone Value + Revenue Synergies (net) + Cost Synergies (net) − Integration Costs − Control Premium = Net Value Created (or Destroyed)
- Build a left-to-right waterfall table with each bar's value, running cumulative total, and direction (+/−)
- Compute Net Value Created = (net revenue synergies + net cost synergies − integration costs) − control premium
- Render the verdict explicitly:
- Value-accretive: net synergies exceed the premium — state the cushion in dollars and as a % of premium
- Value-neutral: net synergies roughly equal the premium — flag thin margin of safety
- Value-destructive: net synergies fall short — quantify the gap and the implied overpayment
- Calculate and state the break-even synergy requirement: the run-rate or NPV synergy figure required to exactly cover the premium, so the user knows how far assumptions must stretch to justify the price
Step 7: Sensitivity Flag
- Identify which single assumption most determines the verdict (usually revenue synergy realization or synergy multiple)
- Show how the verdict flips under a downside case (e.g., revenue synergies at 25% realization) versus base case
- State the minimum cost-synergy realization needed to keep the deal value-neutral if revenue synergies fail entirely
Output Format
- Structure: Bridge waterfall table first, then the verdict box, then break-even and sensitivity
- Length: 700–1,000 words plus tables
- Format: A primary value-bridge table (bar, value, running total, direction), a synergy detail table (gross / haircut / net by type), a one-paragraph verdict, and a short sensitivity section
- Sections: Standalone anchor → Synergy detail (revenue + cost) → Integration & premium deductions → Value bridge waterfall → Verdict → Break-even requirement → Sensitivity flag
- Tone: Corporate development analyst — numbers-forward, conservative on revenue synergies, willing to state plainly when a deal overpays
Quality Checklist
Before delivering output, verify:
- [ ] Every bar uses the same value basis (all enterprise value or all equity value — not mixed)
- [ ] Revenue and cost synergies are capitalized on margin/after-tax cash flow, never on gross revenue
- [ ] Probability haircuts are applied and disclosed for both synergy types
- [ ] The bridge math reconciles exactly: standalone + synergies − integration − premium equals the stated net value
- [ ] The verdict (accretive / neutral / destructive) is stated explicitly with the dollar cushion or gap quantified
- [ ] The break-even synergy requirement is calculated as a specific number, not described qualitatively
Notes
- Revenue synergies destroy more deals than they create — default to skepticism and never let unhaircut revenue synergies carry the verdict
- The control premium is the deal's hurdle rate: if cost synergies alone cannot cover the premium, the deal is leaning entirely on the least reliable synergy category
- When the user supplies only an offer price and standalone value, solve for the implied required synergy and tell them what they'd have to believe to justify the bid
- Keep integration costs visible as their own bar — burying them inside net cost synergies is the most common way overpayment gets hidden in a board deck
How to use this skill
This file is a Claude Code skill in Anthropic's standard format — markdown with YAML frontmatter at the top.
Installing in Claude Code:
~/.claude/skills/<folder-name>/SKILL.md— auto-loads in every session anywhere on your machine (recommended for skills you'll use across multiple projects)<your-project>/.claude/skills/<folder-name>/SKILL.md— auto-loads only when working in that project (recommended for project-specific skills)
Restart Claude Code or open a new session to register.
Using in Claude.ai, ChatGPT, Gemini, or other AI tools:
- Drag this file into a new chat, or copy and paste its contents
- Send your task or request as your next message — the AI will apply the skill where it fits
For Claude Code skill details: https://docs.anthropic.com/en/docs/claude-code/skills