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PWC Case Competition
- 1. Greenlight Sustainability Solution &Strategy Planning Polaris PwC Advisory Team A detailed look at sustainability strategy and environmental reputation reestablishment Nov 2016
- 2. Current Situation Our Process FinancialImpact Short-Term Initiatives PWC Support PwC @ Polaris 1
- 3. Current Situation Problem: Greenlighttire waste discovered in Louisiana wetlands1 Short-term goal: Restore public image2 Long-term goal: Embed environmental concern into everyday operations3 PwC @ Polaris 2
- 4. 80% 20% 80% Complement with short- terminitiatives Pay 20% cash immediately Purchase 80% of RubberUp's StocksPay 80% over a four year term Our Solution PwC @ Polaris 3
- 5. Current Situation Our Process FinancialImpact Short-Term Initiatives PWC Support PwC @ Polaris 4
- 6. Decision Process Cost-benefit Analysis onDifferent options Financing Method Selection PwC @ Polaris 5
- 7. Cost-Benefit Comparison Picking thebest option PwC @ Polaris 6 Acquisition Benefits: - Quick - Established technology, infrastructure, and market channels in place - Enjoy sizable revenues and cash flow, used for short-term initiatives - Vertical integration lower cost - Two companies’ value matches Costs: - Human capital change - $2.5M overall cost Internal Benefits: - Flexible - Continue to perfect Greenlight Operating System(GO) on lean six sigma principles Costs: - Time consuming - Revenue not guaranteed - Lack of pre-existing distribution channels - $2.5M cost
- 8. Our decisioninvolves purchasing 80% of RubberUp’s stock Financed with cash and with debts Decision PwC @ Polaris 7 Impacts - Ensure minimum human capital change - Guarantee revenue - Steady cash flow can be devoted to research and marketing campaigns - Avoid multiple taxation compared to purchase lower than 51% - Lower cost compared to acquire 100% - Protect shareholder’s benefit compared to stock exchange purchase, we know value will go up
- 9. Current Situation Our Process FinancialImpact Short-Term Initiatives PWC Support PwC @ Polaris 8
- 10. Balance Sheet Impact Consolidated balance sheet Greenlight becomes holding company RubberUp becomes subsidiary Taxes are consolidated Synergistic effect PwC @ Polaris 9
- 11. Tax Implications State taxreliefs; specifically Georgia and Mississippi Tax credits available from the federal government for sustainable enterprises Immediate claim to depreciation on RubberUp’s assets PwC @ Polaris 10
- 12. Market Power RubberUpGreenlight After theacquisition of RubberUp, we expect the market power of the consolidated company to be greater than before the acquisition. Consolidated Company PwC @ Polaris 11
- 13. Current Situation Our Process FinancialImpact Short-Term Initiatives PWC Support PwC @ Polaris 12
- 14. Complementary MethodsTest TubeShapesJoin Rubber Manufacturer’s Association Launch a marketing campaign Support eco-friendly tire projects 01 02 03 PwC @ Polaris 13
- 15. Rubber Manufacturer’s Association Designedto ensure environmental diligence with their products RMA Mission - Tire-Derived Fuel - Ground Rubber - Applications - Civil Engineering Scrap Tire Market PwC @ Polaris 14
- 16. MARKETING CAMPAIGN “TIRE CRAFTSMAN” •Tire Art • Recording • The Campaign Promo: • Social networks • Media • Newspaper/magazines PwC @ Polaris 15
- 17. Microscope Shape forPowerPoint We recommend an increase in funding from 3 to 5 percent for degradable tire projects Increase Research Funding PwC @ Polaris 16
- 18. Current Situation Our Process FinancialImpact Short-Term Initiatives PWC Support PwC @ Polaris 17
- 19. Ladder Infographics forPowerPoint05 04 03 02 01 Tax-free acquisition Financing ratio analysis Negotiation Complete valuation of RubberUp Due diligence PwC @ Polaris 18
- 20. Greenlight Sustainability Solution &Strategy Planning Polaris Solution Specialist Team A detailed look at sustainability strategy and environmental reputation reestablishment Nov 2016
- 21.
- 22. Appendix Numbers in thousands RubberUpValuation: 2,800 Greenlight Valuation: 30,000 Projected Pro forma Impact Net Sales 37,000 Net Income 6,200 Total Assets 20,000 Total Liabilities 13,000 Total Equity 7,200 All numbers are in thousand
- 23. Appendix We arrived atthe valuation of RubberUp by benchmarking its revenues and headcounts with similar firms. To get the exact valuation, we found a firm, West Coast Rubber Recylcing, Inc., with revenues of approximately $7 million and headcounts of more than 40 employees. The valuation was at $2.8 million, which we then used for our valuation of RubberUp.
- 24. Appendix Federal depreciation allowance:50% depreciation credit may be taken for equipment and the machinery used for recycling within the first year the property is in service. Manufacturing tax credits: An income tax credit worth 5% of eligible businesses in Mississippi on investments totaling over $1 million
Editor's Notes
- #16 https://rma.org/scrap-tire/scrap-tire-markets About the Rubber Manufacturers Association: RMA is the national trade association representing tire manufacturers that make tires in the United States.RMA began its scrap tire program in 1990. RMA works with all stakeholders, including states, U.S. EPA and the industry to develop markets, reduce scrap tire stockpiles and implement state regulations that foster sustainable scrap tire markets. RMA supports all scrap tire markets that are environmentally sound and economically feasible.
- #18 Degradable projects: Since 2012, the research led by Hassan S. Bazzi, Ph.D., at the Texas A&M University campus in Qatar (TAMU-Qatar)