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PwC Case Study (1)
Greenlight is facing fines and legal issues due to tires being found in protected wetlands. They are considering developing a tire recycling business or acquiring RubberUp, an existing tire recycling company. PwC recommends Greenlight acquire RubberUp to improve their sustainability efforts. Acquiring RubberUp would provide tax benefits from lower tax rates and help Greenlight maximize profits to reinvest in the future. PwC's services could assist Greenlight with financial due diligence, mergers and acquisitions, and ensuring a successful transition.
PwC Case Study (1)
- 1. © 2016 PricewaterhouseCoopersSustainable Solutions Sustainable Solutions Parker Decraene, Alexa Graf, Samuel Isken and Austin Rieck 1
- 2. © 2016 PricewaterhouseCoopersSustainable Solutions 2 Purpose: To provide a basis for Greenlight’s decision on acquiring RubberUp or investing in the development of a tire recycling practice. PwC Services Accounting Implications Balance Sheet Change Sustainable Solutions Current Situation of Greenlight Agenda
- 3. © 2016 PricewaterhouseCoopersSustainable Solutions Company Profile: Greenlight • “At Greenlight, we make tires that keep America moving.” • “Built at Greenlight for Greenlight” • Greenlight 2030 • Incorporated in Delaware and headquartered in Mississippi. 3 Current Situation of Greenlight
- 4. © 2016 PricewaterhouseCoopersSustainable Solutions • Greenlight produced tires that were found in protected wetlands along Mississippi River. • Facing $5 - $10 million in fines and $15 million for restitution. • Need to put sustainability at the center of your business practices • Greenlight plans to develop a business to recycle used tire rubber 4 Current Situation of Greenlight Current Concerns
- 5. © 2016 PricewaterhouseCoopersSustainable Solutions • Two different options moving forward: • Increase Research & Development efforts to implement this idea OR • Acquire RubberUp, an existing business that already has many of the industrial aspects and technology required. 5 Possible Responses Current Situation of Greenlight
- 6. © 2016 PricewaterhouseCoopersSustainable Solutions • Privately held company based and incorporated in Atlanta, Georgia • Manufactures rubber-based products from recycled tires. • Has a strong presence in the market for sustainable and environmentally conscious products. • Originally served only businesses but has recently expanded to serve consumers. 6 Company Profile: RubberUp Current Situation of Greenlight
- 7. © 2016 PricewaterhouseCoopersSustainable Solutions Solution to the Problem • Our Considerations • Current Ratio - Measure of the ability to pay short & long term obligations • Large cash sums are necessary for potential legal problems • Maximization of Net Income is important in looking at potential reinvestment in the future 7 Sustainable Solutions Decision: Acquire RubberUp to improve your sustainability efforts.
- 8. © 2016 PricewaterhouseCoopersSustainable Solutions Changes on The Balance Sheet 8 • Changes from 2015 to 2016 in the Balance Sheet • Cash decreased • Inventories increased • Goodwill increased Balance Sheet Change Cash $1.49m Current Ratio 0.23
- 9. © 2016 PricewaterhouseCoopersSustainable Solutions Corporation Tax By State • Corporation Tax - tax on the income or capital income of corporations • Tax benefit from acquiring RubberUp due to lower tax scenario • Lower tax rate in Mississippi • Sustainable company 9 GA 6.00% MS 5.00% DE 8.70% Accounting Implications
- 10. © 2016 PricewaterhouseCoopersSustainable Solutions Accounting Considerations • Proper accounting procedures for an acquisition • Goodwill Impairment • Acquisition Premium (25% Premium) • Depreciation & Capital Expenditures • Other considerations • Acquisition charges • Research & Development to be expensed or capitalized 10 Accounting Implications
- 11. © 2016 PricewaterhouseCoopersSustainable Solutions • PwC’s Services that will assist you in the future: • Financial Due Diligence • Mergers & Acquisitions • Tax Exposure • Valuations • Strategic Sustainability How can PwC help 11 PwC Services
- 12. © 2016 PricewaterhouseCoopersSustainable Solutions A Look Ahead for Greenlight • Final recommendation by PricewaterhouseCoopers • Acquire RubberUp • Action should be taken immediately • Within two weeks alert the firm if you will be accepting the proposal and acquiring RubberUp. • Acquisition will occur immediately and the firm will be present for the next six to twelve months to ensure a successful transition. 12
- 13. © 2016 PricewaterhouseCoopersSustainable Solutions References PricewaterhouseCoopers, P. (2016). Mergers, acquisitions, dispositions, IPOs. Retrieved November 14, 2016, from http://www.pwc.com/gx/en/services/tax/mergers-and-acquisitions.html PricewaterhouseCoopers. (2016). Greenlight. Retrieved November 16, 2016, from http://greenlight.pwc.com/ PricewaterhouseCoopers. (2016). PwC on Sustainability. Retrieved November 14, 2016, from http://www.pwc.com/us/en/corporate-sustainability-climate-change/pwc-on-sustainability-c- suite.html PricewaterhouseCoopers. (2016). PwC's careers site for students. Retrieved November 14, 2016, from http://www.pwc.com/us/en/careers/campus/why-pwc/firm-facts.html 13
Editor's Notes
- #2 Austin rieck
- #3 AUSTIN RIECK
- #4 ALEXA Hint at problem of sustainability “At Greenlight, we make the tires that keep America moving“
- #5 SAM Sustainable to businerss operation to recycle your tires in a more efficient
- #6 Sam
- #7 SAM Align with our… core business principle
- #8 Parker
- #9 Parker
- #10 ALEXA taxation/exposures
- #11 PARKER
- #12 RIECK Cannot!!! Provide all services due to litigation and legality, however here are the many options of services which we can provide global accounting differences, regulatory requirements, foreign and domestic tax considerations, and the impact the acquisition will have on its financial reporting We help clients Accelerate the transition® and achieve rapid integrations that fully realize desired synergies and allow them to return to a "business as usual" environment as quickly as possible after a deal.
- #13 SAM So we’re giving the greenlight for this acquisition VERBAL CALL TO ACTION So, on conclusion we at PwC recommend Greenlight acquire RubberUp to improve overall net income and liquidity. We at the firm believe that our analysis shows that this is the best option for Greenlight Then just explain the timeline End with In conclusion we are giving the Green light for this acquisitoin