This document provides an executive summary and valuation analysis for eBay Inc. after a planned spin off of PayPal. It includes:
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3) Suggestions for transfer pricing between PayPal US and its foreign affiliates after the spin off.
The document concludes the valuations for eBay after spin off will be in the range of $57-65 billion and for PayPal $40-
Digital Marketing strategy - ICICI Bank. Pooja Pathare
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ICICI Bank Limited is an Indian multinational banking and financial services company headquartered in Mumbai, Maharashtra with its registered office in Vadodara, Gujarat. As of now, i.e. 2018, ICICI Bank is the second largest bank in India in terms of assets and market capitalisation.
Digital Marketing strategy - ICICI Bank. Pooja Pathare
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A study on Vijay Mallya Scam Case: Vijay Vittal Mallya, once known to you and me as ‘The King of Good Times’ or also dubbed ‘ The playboy of the East’ was born to the Indian Entrepreneur Vittal Mallya in 1955. Vittal Mallya was largely known for the role played as the director of United Breweries (UB) Group which he achieved at the age of 23. Following his father’s sudden demise Vijay Mallya became chairman of the UB Group.Vijay Mallya was always known for his flamboyant and posh lifestyle. A testament to these were the lavish New Year Parties at his Kingfisher Villa in Goa or the birthday bashes thrown on his luxurious Yacht ‘ The Indian Empress’.
Securities and exchange board of india act 1992ramandeepjrf
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Merger and Amalgamation (M&A) is one of the forms of Corporate Restructuring. M&A transactions are generally done to diversify the business, reduce competition, exercise increased scale of operations, to focus on core businesses to streamline costs and improve profit margins, etc. Provisions for merger and amalgamation under Companies Act, 2013 also includes demerger. The webinar deals with the provisions of merger and amalgamation enshrined in Companies Act, 2013 read with Rules made there under, legal formalities involved and judicial precedents.
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Powers of Authority and Central Government
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This presentation was given to the ecommerce team to update them on what (and why) we were proceeding with the Virtual Marketplaces Project, including partnering with Channel Advisor. -- Rick Wingender
A study on Vijay Mallya Scam Case: Vijay Vittal Mallya, once known to you and me as ‘The King of Good Times’ or also dubbed ‘ The playboy of the East’ was born to the Indian Entrepreneur Vittal Mallya in 1955. Vittal Mallya was largely known for the role played as the director of United Breweries (UB) Group which he achieved at the age of 23. Following his father’s sudden demise Vijay Mallya became chairman of the UB Group.Vijay Mallya was always known for his flamboyant and posh lifestyle. A testament to these were the lavish New Year Parties at his Kingfisher Villa in Goa or the birthday bashes thrown on his luxurious Yacht ‘ The Indian Empress’.
Securities and exchange board of india act 1992ramandeepjrf
Securities and exchange board of india act 1992 explains the role, powers and functions of the Securities and Exchange Board of India. you can also Know the penalties and adjudication and identify the establishment, jurisdiction, authority and procedure of Appellate Tribunal.
OBJECTIVE
Merger and Amalgamation (M&A) is one of the forms of Corporate Restructuring. M&A transactions are generally done to diversify the business, reduce competition, exercise increased scale of operations, to focus on core businesses to streamline costs and improve profit margins, etc. Provisions for merger and amalgamation under Companies Act, 2013 also includes demerger. The webinar deals with the provisions of merger and amalgamation enshrined in Companies Act, 2013 read with Rules made there under, legal formalities involved and judicial precedents.
Key Takeaways:
Need for Legislation
Establishment and Functions of Authority
Accounts and Finance Functions
Powers of Authority and Central Government
Overview of Regulators in Other Countries
After the markets pounded SaaS early this year, CEOs started gearing up for a downturn. Your company may already be tightening its belt. But that might not be enough. Gainsight CEO Nick Mehta, InsightSquared CEO Fred Shilmover, and Bessemer Venture Capital partner Byron Deeter are teaming up for an all-star webinar to outfit you with a plan for the downturn. They'll discuss:
The timeline for the SaaS "reset"
Optimizing customer acquisition
Investing in lean revenue
And much, much more
This presentation was given to the ecommerce team to update them on what (and why) we were proceeding with the Virtual Marketplaces Project, including partnering with Channel Advisor. -- Rick Wingender
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Don't miss expert strategic insights, best practice tips and techniques as well as brand case studies that illustrate how you can increase online revenue by up to 12% using the approach presented.
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Effective CRO integration as part of a multi-channel brand experience
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Spring 2017
Recommended EatRite, a family-owned grocer, expand its private label, launch a technology initiative, and actively invest in human capital
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Similar to EBay and PayPal Spinoff Pitch Book (20)
1. 1
eBay Inc. Spin Off Valuation
December 12, 2014
Jessica Chen
Yuxie Li
Haodao Zhang
2. 2
Agenda
Home
Products Inc.
I. Executive Summary 3
II. Company Overview 5
III. Economic Outlook 8
IV. Industry Trends 11
V. Valuations 14
A. Discounted Cash Flow Analysis 15
B. Comparable Companies Analysis 19
VI. Transfer Pricing 24
VII. Comprehensive Conclusion 32
VIII. Appendix
4. 4
Executive Summary
Home
Product Inc.
• eBay is the world’s largest online marketplace with 149 active global users
• eBay utilizes an Auction-Based sales mode, where individual users outbid each other
• PayPal was launched as a money transfer service in 1999
• PayPal filed its IPO in early 2002 at $13 per share and raised over $61 Billion
• PayPal now covers 2013 markets with 152 million active users using 100 currencies
• In September 2014, eBay announced its decision to spin off PayPal to give PayPal more
flexibility for future deal opportunities
Introduction to eBay and PayPal
• We provide two valuation methods—Discounted Cash Flow Analysis and Comparable
Companies Analysis for each company after the spin off. Both results reconcile with each
other
• We conclude a valuation rage of 57B-65B for eBay and a valuation range of 40B-70B for
PayPal
Valuation for eBay and PayPal
• We provide suggestions on the transfer pricing of all the 15 corporate services PayPal US
provides to foreign Affiliates.
• We also analyzed some benefits and risks of using Service Cost Method and Cost of
Services profits method.
Transfer Pricing
6. 6
Company Overview
Summary
Home
Products Inc.
• Background: eBay was founded in 1995 by Pierre Omidyar. It provides online market
places for the sale of goods and services to individuals and businesses
• Products: eBay operates its business through 3 segments: Market Place, Payments and
Enterprise
• Geography: International operations with large presence in U.S, Germany and U.K
Source:10-K Source: Seeking alpha
7. 7
Key drivers
Home
Products Inc.
Private
Label
42% Branded
Products
58%
1. Online Business mode：
The complete online business mode help the company to gain a larger customer
base and
2. Distribution channel and replacement effect:
eBay uses the traditional distribution channel without disintermediation-they
serve the customers use the existing distribution channels.
3.Information disclosure:
One way eBay do to reduce the asymmetric information between buyers and
sellers is to allow sellers to disclose as much information as possible,
furthermore, they creates the chatting mechanism between sellers and buyers
to reduce the misinterpretations.
4. Time Frame：
eBay tailors its time frame of auctions to customers’ needs, so that they can
attract more people to participate in the transactions.
Source: FactSet
9. 9
Positive growth opportunity for eBay
• U.S. consumers benefits from global disinflation
• Low interest rate can stimulus people’s consumptions
• U.S consumers benefitting from stronger performance of U.S dollars
• E-Commerce represents one of the most steady growth industry, with an average of 8%
growth rate
Economic Outlook
Macroeconomic Overview
Home
Products Inc.
Source: Forrester Inc.
10. 10
Positive growth opportunity for PayPal
• Payment terminals represent 7% of the payment methods
• Low cost direct bank transfer, developer-friendly intergation, specialized digital software
has is rising steady at 24.3% each year.
• There are 1 trillion consumers shopping on the internet, represent a 20% annual growth
Economic Outlook
Macroeconomic Overview
Source: MarketLine
12. 12
Home
Products Inc.
Internet Retailer Industry Overview
• Threats of new entrants are low. The industry has low of competitors including Amazon, Auction
Universe, etc.
• Threats of substitutes are low because of customer loyalty and the difficulty to attract customers
from competitors
• Suppliers bargaining power is low due to large amount of buyers on the internet
• Buyers bargaining power is medium. Even though buyers seek for the low price products, their
bargaining power is lower than eBay since eBay already provide lower than market price
• Based on the analysis above, the industry competition is medium.
Business Model Analysis
13. 13
• PayPal represents approximately 10% of the total revenue of eBay
• PayPal’s diminished competitive advantage as a standalone business and potential
barriers in the merger and acquisition activities.
• There is an increased in expectations for increased marketing investments and
promotional activity in the challenging operations, which put pressure on the company
profit margin
Company Trend--Spin Off
Company Trend
Source: MarketLine
24. 24
Transfer Pricing
Transfer Pricing Overview
S As a multinational business, PayPal is now operating in 203 markets and 26 currencies,
which increases the importance of transfer pricing policies for PayPal.
To maintain efficiencies in business, PayPal US need to provide various services to it’s
subsidiaries around the world, using transfer pricing policy.
The following slides will explain the transfer pricing policies for PayPal’s 9 international
subsidiaries and 15 corporate services.
25. 25
Transfer Pricing
Transfer Pricing Policy I
Since these services are Shareholder Activities or Duplicative Services, to costs will be
incurred for PayPal Foreign Affiliates.
26. 26
Transfer Pricing
Transfer Pricing Policy II
Determined by the
business of
different foreign
affiliates.
Determined by the
amount of time
working to help
foreign affiliates
Source: Exhibit 3
Using the
median
benchmark from
Exhibit 3.
27. 27
Transfer Pricing
Transfer Pricing Policy II (Continued)
These services, not
matter common through
industry or contribute to
key competitive
advantages could
benefits the foreign
affiliates.
The key to allocate
cost is determined by
the benefits of different
Corporate Services.
For example, HR
services costs depend
on how many people
the entity have and
how many people the
entity want.
Source: Final Service Regulation
28. 28
Transfer Pricing Policy II (Continued)
Transfer Pricing
Whether we could use
SCM method depends
on three rules:
1. Is it common
across industry?
2. Is median
comparable
markup on total
services
transaction is less
than or equal to
7%?
3. Is it some specific
services?
Source: Final Service Regulation
29. 29
Transfer Pricing
Services Cost Method (SMC) Analysis
Services cost method allows entities to use only the total cost of the services as
transfer prices. Here are the benefits and risks.
Benefits of SMC Risks of SMC
Companies could use the total
costs of the services, without any
markup, as transfer prices.
Companies will be able to shift
revenues from high-taxation
counties to low-taxation countries
to avoid significant amount of
taxes (Shown in next slide).
Source: Final Service Regulation
Four requirements for SMC
are difficult to meet altogether.
It is likely failing to meet
the four strict requirements
which may result in a higher
markup by governments.
30. 30
Transfer Pricing
How much we gain from using SMC in 2015?
• Comparing SCM and Cost of Services Plus Method, the markup value is the
difference.
• The difference in markup value will provide PayPal tax shield (Indicated in the
next slide)
Source: KPMG Global Tax Table
31. 31
Transfer Pricing
How much we gain from using SMC in 2015? (Continued)
• Comparing to SCM, Cost of Service Plus Method results in a higher revenue
in PayPal US, and a lower cost of net revenues in foreign affiliates.
• The difference between these two is the benefits from using SCM rather than
Cost of Service Plus, which is $0.66 million.
33. 33
Comprehensive Conclusion
Valuation
From DCF model, we estimate after spinoff, eBay has a EV
range of 57B to 73B, and PayPal has a EV range of 60B to
78B
From comparable analysis, we estimate eBay has a EV range
of 34B to 65B, and PayPal has a EV range of 34B to 63B.
Transfer
Pricing
Therefore, we conclude a EV range of 55B to 75B for eBay,
and a EV range of 60B to 73B for PayPal
Comparing SCM and CoSPM, there is significant amount of
tax eBay could avoid using SCM. However, it might bear more
risks
From comparable analysis, we estimate eBay has a EV range
of 50B to 77B, and PayPal has a EV range of 40B to 68B
Out of 15 corporate services, 4 of them doesn’t apply to
transfer pricing and 11 of 15 are eligible
34. 34
Income Statement 2010 2011 2012 2013 2014 Q1-Q3 2014 Q4 E 2014E
Segment Revenues
Marketplaces $5,720.60 $6,642.00 $7,398.00 $8,284.00 $6,485.00 $2,377.26 $8,862.26
Changes from last year 7.73% 16.11% 11.38% 11.98% 6.98%
Payments 3,435.60 4,412.00 5,574.00 6,628.00 5,741.00 2,156.09 7,897.09
Changes from last year 22.88% 28.42% 26.34% 18.91% 19.15%
Enterprise - 590.00 1,083.00 1,112.00 795.00 416.50 1,211.50
Changes from last year 83.56% 2.68% 8.95%
Corporate and Others - 8.00 17.00 23.00 (40.00) (11.00) (51.00)
Changes from last year 112.50% 35.29%
Net Revenue 9,156.51 11,652.45 14,073.21 16,047.34 12,981.00 4,938.85 17,919.85
Growth Rate 4.92% 27.26% 20.77% 14.03% 11.67%
Net Revenue for Paypal 3,435.60 4,412.00 5,574.00 6,628.00 5,741.00 2,156.09 7,897.09
Net Revenue for Ebay 5,720.60 7,240.00 8,498.00 9,419.00 7,240.00 2,782.76 10,022.76
Cost of net revenue
Marketplaces 1,071.00 1,210.00 1,273.00 1,520.00 1,246.00 456.43 1,702.43
Changes from last year 18.70% 18.20% 17.20% 18.30% 19.20% 19.20% 19.20%
Payments 1,493.00 1,866.00 2,209.00 2,675.00 2,271.00 853.81 3,124.81
Changes from last year 43.50% 42.30% 39.60% 40.40% 39.60% 39.60% 39.60%
Enterprise - 374.00 696.00 821.00 612.00 320.71 932.71
Changes from last year 63.40% 64.20% 73.80% 77.00% 77.00% 77.00%
Corporate and Others - 11.00 38.00 20.00 3.00 1.00 4.00
Changes from last year 245.45% -47.37% -85.00% -66.67% 300.00%
Total cost of net revenue 2,564.00 3,461.00 4,216.00 5,036.00 4,132.00 1,631.95 5,763.95
Total gross Profit 6,592.51 8,191.45 9,857.21 11,011.34 8,849.00 3,306.90 12,155.90
Operating Expenses
Marketplaces 2,344.60 2,801.00 3,182.00 3,413.00 2,820.00 702.29 3,522.29
Changes from last year 19.47% 13.60% 7.26% 3.20%
Payments 1,220.60 1,568.00 2,006.00 2,365.00 2,110.00 631.17 2,741.17
Changes from last year 28.46% 27.93% 17.90% 15.91%
Enterprise - 133.00 259.00 200.00 167.00 33.95 200.95
Changes from last year 94.74% -22.78% 0.47%
Corporate and Others 973.00 1,316.00 1,521.00 1,662.00 1,299.00 371.36 1,670.36
Changes from last year 35.25% 15.58% 9.27% 0.50%
Total Operating Expenses 5,300.51 6,758.45 8,169.21 9,040.34 7,081.00 2,668.18 9,749.18
Growth Rate 10.64% 27.51% 20.87% 10.66% 7.84%
Operating Expenses for Paypal 1,220.60 1,568.00 2,006.00 2,365.00 2,110.00 631.17 2,741.17
Operating Expenses for Ebay 3,317.60 4,250.00 4,962.00 5,275.00 4,286.00 1,107.59 5,393.59
EBITDA 1,292.00 493.00 488.00 1,971.00 1,768.00 638.72 2,406.72
EBITDA for Paypal 722.00 978.00 1,359.00 1,588.00 1,360.00 671.11 2,031.11
EBITDA for Ebay 1,332.00 1,395.00 1,529.00 1,783.00 1,093.00 897.03 1,990.03
Appendix A-1 Historical Financials
