How do you calculate the terminal value when the target is valued in an M&A context (acquirer's view)?

An M&A context brings two complications:

• Cost synergies get built into the forecasts → terminal year FCF higher than standalone.
• The acquirer often has a lower WACC (larger firm, higher rating) → the discount rate changes. Clean approach: the standalone valuation as a floor (pre-synergies, at the target WACC), then a separate synergy value as the NPV of the synergies (at the acquirer WACC). Capitalize recurring synergies such as cost reductions with Gordon: TV-synergy = Synergy_y5 × (1+g) / (WACC − g).