# Why 20% for IT cost and 30% for Headquarter cost

REA Reinsurance
New answer on Jan 05, 2021
1.2 k Views

Please help with my query . In case of HQ cost 10% was removed from our client and 20% from target which is in line with 30% assumption . But in IT it was only total 20% .

Also of you can explain wht staff cost should not be considered for synergy . Thank you

• Date ascending
• Date descending

Cheers,

Clara

Dear All - Further clarifying my question . In the case we have taken below assumption :reasonable percentage of costs that can be saved through synergies. 30% would be a good estimation. Now while calculating the Headquarter cost , I see below calculation Headquarter costs Eligible for synergies: Yes! REA: 10% * 4,000,000 = \$400,000 Acquired company: 20% * \$3,600,000 = \$720,000 Total = \$1,120,000 (30% = \$336,000 for simplification: \$350,000). I am taking this as 30 % . But while calculating IT cost I see below calculation T costs Eligible for synergies: Yes! REA: 90% * \$4,000,000 * 10% = \$360,000 (costs in regions * total cost * share of IT costs) Acquired Company: 80% * \$3,600,000 * 10% = \$288,000 (Which is 20% ) . Hope this is clear please

Hello Kari!

Cheers,

GB

Dear All - Further clarifying my question . In the case we have taken below assumption :reasonable percentage of costs that can be saved through synergies. 30% would be a good estimation. Now while calculating the Headquarter cost , I see below calculation Headquarter costs Eligible for synergies: Yes! REA: 10% * 4,000,000 = \$400,000 Acquired company: 20% * \$3,600,000 = \$720,000 Total = \$1,120,000 (30% = \$336,000 for simplification: \$350,000). I am taking this as 30 % . But while calculating IT cost I see below calculation T costs Eligible for synergies: Yes! REA: 90% * \$4,000,000 * 10% = \$360,000 (costs in regions * total cost * share of IT costs) Acquired Company: 80% * \$3,600,000 * 10% = \$288,000 (Which is 20% ) . Hope this is clear please

Hi Kari,

I'm sorry but your question is very very difficult to follow. What exactly are you asking?

Dear All - Further clarifying my question . In the case we have taken below assumption :reasonable percentage of costs that can be saved through synergies. 30% would be a good estimation. Now while calculating the Headquarter cost , I see below calculation Headquarter costs Eligible for synergies: Yes! REA: 10% * 4,000,000 = \$400,000 Acquired company: 20% * \$3,600,000 = \$720,000 Total = \$1,120,000 (30% = \$336,000 for simplification: \$350,000). I am taking this as 30 % . But while calculating IT cost I see below calculation T costs Eligible for synergies: Yes! REA: 90% * \$4,000,000 * 10% = \$360,000 (costs in regions * total cost * share of IT costs) Acquired Company: 80% * \$3,600,000 * 10% = \$288,000 (Which is 20% ) . Hope this is clear please

Content Creator
McKinsey | Awarded professor at Master in Management @ IE | MBA at MIT |+180 students coached | Integrated FIT Guide aut
68
Meetings
23,105
135
Awards
5.0
57 Reviews
How likely are you to recommend us to a friend or fellow student?
0
1
2
3
4
5
6
7
8
9
10
0 = Not likely
10 = Very likely