PwC provides a sustainability strategy and solution for Polaris to address discovered tire waste in wetlands and rebuild its public image. The solution involves Polaris purchasing 80% of RubberUp's stock, financed partially with cash and partially with debt. This acquisition would provide established recycling infrastructure and channels while generating revenue to fund marketing and research to further sustainability goals. Short-term initiatives include joining a recycling association, a marketing campaign, and increasing research funding. PwC's due diligence and financing guidance would support a tax-advantaged acquisition.
1. Greenlight Sustainability
Solution & Strategy Planning
Polaris
PwC Advisory Team
A detailed look at sustainability strategy and
environmental reputation reestablishment
Nov 2016
3. Current Situation
Problem: Greenlight tire 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-
term initiatives
Pay 20% cash
immediately
Purchase 80%
of RubberUp's StocksPay 80% over a four
year term
Our Solution
PwC @ Polaris 3
7. Cost-Benefit Comparison
Picking the best 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 decision involves 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
11. Tax Implications
State tax reliefs;
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 the acquisition of RubberUp, we expect the market power of the
consolidated company to be greater than before the acquisition.
Consolidated Company
PwC @ Polaris 11
17. Microscope Shape for PowerPoint
We recommend an
increase in funding from 3
to 5 percent for
degradable tire projects
Increase Research Funding
PwC @ Polaris 16
19. Ladder Infographics for PowerPoint05
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
22. Appendix
Numbers in thousands
RubberUp Valuation: 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 at the 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
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.
Degradable projects: Since 2012, the research led by Hassan S. Bazzi, Ph.D., at the Texas A&M University campus in Qatar (TAMU-Qatar)