USA Clean & Renewable Energy Opportunities for German Companies June 30 2010 Ppt (2)Presentation Transcript
U.S. Market Entry Strategies: The “Level Playing Field” for International Companies Presented by: Eliot Norman , International Practice Partner Williams Mullen [email_address]
The Virginia Advantage
U.S. POPULATION DISTRIBUTION
Central location along the Atlantic Coast
Nearly 50 percent of the nation’s population and 50 percent of the manufacturing activity are within 1000 kilometers of Richmond
Well-developed transportation system provides access to major markets: The 3 rd largest state-maintained transportation network
The 3 rd largest container port on the U.S. East Coast & inland port provides an interface between truck and rail services for transfer of ocean-going containers
Washington Dulles International Airport has nonstop service to almost 130 destinations
Virginia’s Strategic Location
Business Begins in Virginia! Forbes.com: Best State for Business 2006, 2007, 2008, 2009 Cable Channel CNBC: Top State for Business 2007 & 2009 Entrepreneur.com: Best State for Starting New Business 2006 - #2 Pollina Corporate Real Estate Inc.: Top 10 Pro-Business States 2004 - 2009
Streamlined environmental permitting process
Efficient Court System
Training programs to help new businesses become operational faster
Right-to-work law allows individuals the right to work regardless of membership in a labor union or organization
AAA bond rating
Ranked among the best in the U.S. Chamber of Commerce’s 2010 study for having the “Best Legal System”
Legal Advantages for International Businesses
Concierge Services: How to Keep it Simple to Enter the U.S. Market
Support Services for Starting a Business in Fairfax County Virginia
Virginia’s Concierge Legal Services Program
How the program works
What are the services offered?
Result: another Virginia Advantage for your international business
Top 12 Concierge Services for “Start-up” of Your U.S. Company
Form U.S. company: corporation or limited liability company
Conduct trademark search and file trademark application
Reserve and apply for Internet domain name
Apply to Internal Revenue Service for Employer Identification Number for tax purposes
File local business license
Review lease for office
Concierge Services (cont.)
Assist with opening U.S. bank account, obtaining U.S. Social Security numbers
File for New Office L-1 or other visas for manager and family
Strategic Advice for Obtaining U.S. Government Grants, Contracts or Subcontracts
Advise on employment law
Advice on export of products to U.S.
Review distribution/agency agreements for selling products in U.S.
First Choice for Visas: New Office L-1
The L-1A Manager
The L-1B Specialized Knowledge
Both allow transfer from German company to U.S. company
The L-1 is a very useful temporary, nonimmigrant visa for starting a new office in the United States
L-1 Visas: Intra-Corporate Transfers Energy Renewables Technologies USA, Inc. FAIRFAX, VIRGINIA Energy Renewables GmbH Munich, Germany Managers, Executives Engineers Energy, Ltd Manchester, UK IP Experts Energy Technology, SA Grenoble,France Hydro Technical Support Staff Energy Syste ms, Ltd. New Delhi, India SoftwareProgrammers L-1 Transfers Energy Holding GmbH Berlin, Germany 67% 100%
Other Support Services
Compliance and risk management
Products Liability—reducing risks
Energy Regulatory Compliance
Advice on important contracts under U.S. law
non-compete and confidentiality agreements
Financial incentives under U.S. Recovery Act
Strategic Advice :M&A and joint ventures
Doing business with U.S. government
The “Level Playing Field” For U.S. Market Entry
American Recovery and Reinvestment Act of 2009 (ARRA)
Signed into law by President Obama on February 17, 2009
Provides a total of $787 billion in funds
Unprecedented level of funding designed to help create and save jobs, jumpstart the economy, and build the foundation for long-term economic growth
Follow the Money: U.S. Stimulus Act Allocations?
Roads and Bridges?
ARRA: Spending Provisions
Funds designated to the following sectors:
Energy and Environment: $98 billion
Transportation: Rail, roads and bridges: $49 Billion . Only 50% of Energy/Environment .
Defense and Security: $16.448 billion
Agriculture and Rural Development: $15.986 billion
Biomedical research $10 billion
3 rd Generation Photovoltaic Cells
Can Foreign Companies Participate in ARRA Projects?
Common Perception: Given the purpose of ARRA, and its Buy American Provisions, Stimulus Projects must be reserved for U.S. companies and U.S. manufactured products
ARRA states: Any ”project for …public building or public work” can use Stimulus funds only if all the iron, steel and manufactured goods are produced in the United States.” Buy American?
But ARRA also says that : “This section shall be applied in a manner consistent with U.S. obligations under international agreements:” WTO obligations apply.
Reality: Significant exceptions to Buy American Provisions exist and can benefit foreign companies:
Buy American Act Provisions not a major issue
Proof: Look no further than Iberdrola Renovables or SAFT/Johnson Controls
“ Buy American” provisions affecting Stimulus Act public construction projects do not prevent foreign company from being contractor or supplier when:
Application of “Buy American” provisions would contradict U.S. obligations under international agreements.
The United States and the company’s foreign country are signatories to the WTO-GPA.
The WTO-GPA prohibits application of the BUY AMERICAN ACT to Stimulus Act procurements by federal agencies and 37 state or other government authorities.
Who Has Signed the WTO-GPA?
Parties and Date of entry into Force/Accession:
Canada 1 January 1996
European Communities with regard to its 27 member States: Austria, Belgium, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxemburg, the Netherlands, Portugal, Spain, Sweden and the United Kingdom1 January 1996Cyprus, Czech Republic, Estonia, Hungary, Latvia, Lithuania, Malta, Poland, Slovak Republic and Slovenia 1 May 2004 Bulgaria and Romania 1 January 2007
Hong Kong , China 19 June 1997 Iceland 28 April 2001 Israel 1 January 1996 Japan 1 January 1996 Korea 1 January 1997 Liechtenstein 18 September 1997 the Netherlands with respect to Aruba 25 October 1996
Norway 1 January 1996 Singapore 20 October 1997 Switzerland 1 January 1996 Chinese Taipei 15 July 2009
United States 1 January 1996
Example 1: U.S. Department of Transportation (but not Federal Aviation Administration) solicits bids for Stimulus Act project.
Result: A Foreign WTO-GPA company is eligible to bid , because Annex 1 to GPA lists U.S. Department of Transportation (but not Federal Aviation Administration) among covered central government entities.
Example 2: Pennsylvania Department of Transportation (but not South Carolina Department of Transportation) solicits bids for project.
Result: A foreign WTO-GPA company is eligible to bid , because Annex 2 to GPA lists Pennsylvania Department of Transportation (but not South Carolina Department of Transportation) among covered sub-central government entities.
Example 3: Port of Baltimore (but not City of Charleston) solicits bids for project.
Result: A foreign WTO-GPA company is eligible to bid , because Annex 3 to GPA lists Port of Baltimore (but not City of Charleston) among other covered entities.
Buy American” provisions affecting stimulus-package public construction projects do not prevent a foreign company from being contractor when:
Company can obtain WAIVERS of Buy American Provisions in Stimulus Act
U.S. companies do not produce goods “in sufficient and reasonably available quantities” and of “satisfactory quality”; or
Application would contradict “the public interest.”; or
Application would increase project’s overall cost by more than 25%.
Remember: “International agreements” do not provide only exception to “Buy American” requirements
Between 7 April 2008 and 17 September 2009, 18 Federal Register notices from U.S. government entities including Environmental Protection Agency, Department of Commerce and Department of Agriculture have granted:
13 “unavailability” waivers; and
5 “public interest” waivers.
Stimulus Act: Lets Assume That “Buy American” Provisions Apply
A foreign company can still participate in the procurement under the Stimulus Act if:
There has been a “substantial transformation” of its products in the United States into a new or different “manufactured good distinct from the materials from it was transformed.”
NOTE: “There is no requirement with regard to the origin of components or subcomponents in manufactured goods or products, as long as the manufacture of the goods occurs in the United States.”
There are also “De minimis” exceptions: 5% of value for incidental products (EPA) = Blanket Waivers
Summary: Each case has to be evaluated individually in terms of the products involved, the identity of the procuring agency, whether the Buy American Act provisions apply, and whether exceptions or waivers to the Buy American Act provisions exist
German Turbo-Generators for Waste-to-Energy Power Plants
German Turbo-Generators for Waste-to-Energy Power Plants
We “Americanize” the supplier
We qualify under Buy American
We block Chinese competition
M&A: How to Accelerate U.S. Market Entry
Why Buy? Why Now?
Defining Your Acquisition Strategy
Due Diligence, Negotiations and Closing the Deal
Financing the M&A Deal
Post-Acquisition Operations/Risk Management
The Joint Venture Alternative
Special Issues: IP, Antitrust, Buying Government Contractors
U.S. Immigration: recruiting/retaining global talent post-acquisition.
Make initial contacts with identified targets to explore potential strategies for partnership
Monitor websites that list businesses for sale, and reach out to investment banks and business brokers to learn about their existing sell-side clients
Be prepared to execute the seller’s form of Confidentiality Agreement prior to receiving any detailed information
Review available information on the target, and request additional data, as needed
Prepare financial models reflecting the effects of the acquisition and quantify any available synergies. Sellers may request preliminary valuation feedback before proceeding to in-person meetings
If interest exists to move forward, visit the target’s headquarters to meet the management team and tour the facility. More detailed information is typically made available at this stage
Based on information obtained to-date and with support of shareholders and financing sources, prepare a formal, non-binding letter of intent to make the acquisition
Identifying Targets And Initial Due Diligence Internal Preparation
Define high-level acquisition strategy, including rationale(s) for acquisition, characteristics and deal size of ideal target, etc.
As possible, develop a list of potential targets, such as high-quality competitors, joint venture partners, other members of industry trade groups, etc.
Coordinate the assembly of a professional deal team, including experienced transaction attorneys, investment bankers/buy-side brokers, an accounting diligence firm, and other advisors
Begin assessing long-term capital needs, including meeting with bankers and expanding financial flexibility as needed
Closing the Transaction (8-10 weeks)
If agreement on transaction price and structure is reached, proceed to closing through multiple and simultaneous “work streams” (1) :
Conduct confirmatory due diligence
Financial/Accounting and Tax
Sales & Marketing
Legal and Risk Management
Negotiate Purchase & Sale agreement and disclosure schedules
Secure transaction funding (as needed)
Execute P&S agreement and close
Buy-Side M&A Process (1) See next slide for a diagram of a coordinated buy-side due diligence and closing process.
Target Company Operations / Manufacturing Sales & Marketing Environmental Legal & Intellectual Property Acquiring Company Real Estate Risk Management Accounting Finance & Treasury Human Resources & Benefits Buy-Side Financial Advisor HR and Benefits consultants, if appropriate 3 rd party insurance providers, if appropriate Appraisal firms, if necessary Transaction services team, if desired Banks & Financial institution discussions Outside Counsel Consultant for market study, if appropriate Environmental consultants, if appropriate Tax work and review with Auditor Coordinated Buy-Side Due Diligence and Closing Process
Joint Ventures & Teaming Arrangements: Alternate U.S. Market Entry Strategies
Often an excellent alternative to the M&A deal
Factors for success
When and why does it not work?
How to structure: tax, legal issues
Use in Government Contracting?
Use in private sector projects
Standard Competitive Bidding model may not always apply to government contracts or subcontracts
Alternatives: Teaming arrangements with Energy Company holding the General Contract
How does it work?
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International Tax Planning Before You Cross the Atlantic
Other Inbound Investment Considerations:
Tax and Treaty Eligibility
Corporate vs. LLC form: Corporations do not have "flow through" tax treatment and hence are required to file tax returns. Limited liability companies, on the other hand, have "flow-through" tax treatment and are not required to file income tax returns; rather their parent companies must file income tax returns in the United States. Since most foreign companies do not want to file tax returns in the United States, the preferred form of entity for U.S. operations of foreign companies most often is the corporation.
Worldwide Income Taxation (subject to foreign tax credit regime)
Income Tax . The revenue generated by the U.S. subsidiary or U.S. operations of a foreign business will be subject to taxation in the U.S. This tax is assessed at the federal and state levels.
Federal Tax . Federal income tax rates are set depending upon many factors. Federal corporate tax rates range between 15% and 39%; the average tax rate is typically 35%.
State Tax . State income tax rates are set forth on a state by state basis. The current rate for corporate income tax in North Carolina is 6.9%. This is lower than many other states, including California (8.84%) and New York (7.5%-9%).
Keep it Simple: Concierge Services for “Start-up” of Your Company
There is a “Level Playing Field”: You just need to know the Rules of the Game
Broad range of opportunities under U.S. Recovery Act
Special incentives for Renewable Energy and GreenTech Projects (large and small, R&D and manufacturing)
Money not yet spent or allocated.
Not too late , particularly if you find the right Teaming Partner
Mergers & Acquisitions: Accelerate your Entry and Americanize your Company
The Joint Venture/Teaming Arrangement Alternative, particularly in Government Contracts Field
Be flexible, get advice early in the process
Steps for Success: U.S. Recovery Act Public Sector Projects
Feasibility Audit to best position your company
Identification of best opportunities under ARRA
Teaming Arrangements, JV or Strategic Acquisitions to maximize your access to Stimulus Act Projects
Legal guidance concerning application of WTO-GPA
Supply chain planning to avoid Buy American Act issues; or
Representation of foreign companies in obtaining waivers of Buy American Act Provisions
Obtain advice after contract awards on compliance with government contract laws and regulations
Select advisory team to help your company finance, prepare for and close the deal if you are doing M&A, JV.
Consider support services for future business operations: financial, tax and accounting, legal, strategic.
Steps for Success: U.S. Recovery Act Private Sector Projects
Feasibility Audit to assess your company’s technologies and match opportunities under Stimulus Act
Advice on available tax credits, guaranteed loans, grants and other financial incentives. If project is in the clean energy sector, consider potential impact of Carbon management, financing and “cap and trade”
Decide on use of Teaming Arrangements, JV or Strategic Acquisitions
Obtain advice on application of any Buy American Provisions tied to Stimulus Act incentives
Formulate business growth strategy
Select advisory team to help your company finance, prepare for and close the deal if you are doing M&A, JV.
Consider support services for future business operations: financial; tax and accounting; legal; strategic.