Companies usually try to portray mergers as an opportunity to “trim the fat” or to create more more revenue than the individual companies can do independently.  If these were not the goals, mergers would never take place, right?

The Wall Street Journal today looks at the attempted acquisition by PepsiCo of two large bottling companies (one of which, PepsiAmericas, is based in Minneapolis, by the way).  Interestingly enough, in this situation the two bottlers have themselves looked at merging in the past but the idea was dismissed because estimates of cost savings were “deemed too modest to justify a deal.”

Synergy, like beauty, rests in the eye of the beholder. Just ask PepsiCo.

The soft drink giant is seeking to acquire its two main bottlers–Pepsi Bottling Group and Pepsi Americas–for about $6 billion. Both have rejected Pepsi’s offer. The main issue: synergy, or just how much money can be saved by combining the three companies into one?

Deal Journal / Breaking Insight from WSJ.com. Matthew Karnitschnig. Wall Street Journal. (Eastern edition). New York, N.Y.: May 21, 2009. pg. C.3

In time we may know (assuming that one or both of these combinations takes place) if the companies are worth more together than apart, but that is unlikely.  Once the books and the operations are combined the ability to know what “would have happened” had a combination not occurred becomes difficult at best.  There have been some spectacular merger failures in the past few years but several that have gone off without a hitch as well (the failures tend to be more widely covered than the successes).  Who knows what the case will be in this situation.