# Company E has an EBITDA of \$300M and Company F has an EBITDA of \$150M. Let’s say that Company E acquires Company F and realizes \$50M in revenue synergies from additional unit sales and \$100M from cost synergies. What is the pro forma EBITDA? Assume that the pro forma company has a gross margin of 60%.

If there are revenue synergies of \$50M in additional unit sales, then this also suggests that these extra units sold will incur an additional cost. Since we know that the gross margin is 60%, we can assume that cost of goods sold can be calculated as \$50M x 60% = \$30M. Therefore, we are earning \$50M – \$30M = \$20M of additional EBITDA from these unit sales.

Cost synergies are \$100M, which could be derived from improving the efficiency of the business through scale or increased bargaining power with suppliers. They will flow directly to EBITDA.

Therefore, pro forma EBITDA can be calculated as Company E EBITDA + Company F EBITDA + additional EBITDA from revenue synergies + cost synergies = \$300M + \$150M + \$20M + \$100M = \$570M.