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Mobility and transactions A look at the critical role global mobility plays in transactions
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Disclaimer
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► This presentation is © 2015 EYGM Limited. All Rights Reserved. No part of this document may be reproduced, transmitted or otherwise distributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying or using any information storage and retrieval system, without written permission from Ernst & Young LLP. Any reproduction, transmission or distribution of this form or any of the material herein is prohibited and is in violation of US and international law. Ernst & Young LLP expressly disclaims any liability in connection with use of this presentation or its contents by any third party.
► Views expressed in this presentation are those of the speakers and do not necessarily represent the views of Ernst & Young LLP.
► This presentation is provided solely for the purpose of enhancing knowledge on tax matters. It does not provide tax advice to any taxpayer because it does not take into account any specific taxpayer’s facts and circumstances.
► These slides are for educational purposes only and are not intended, and should not be relied upon, as accounting advice.
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Agenda for today’s discussion
► Introductions ► Common transaction issues and challenges ► Sharing recent experiences
► Microsoft ► Nokia acquisition
► eBay ► PayPal separation
► Bayer ► Covestro spin-off
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Common transaction issues and challenges Policy considerations
Consider “white paper”
approach
Policy
Assessment Determine what
changes need to be implemented
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Common transaction issues and challenges Guiding principles
Continuing with ongoing operations to support the business
Proactive communications
Ensuring compliance
Project management office (PMO) –
mobility as a separate work
stream
Identify potential areas of risk to
go-live
Spin-off
(i.e., clone and go?)
Establishing guiding principles
Understanding the core deal terms
How to handle ongoing changes
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Common transaction issues and challenges Typical mobility focus areas
Employment law Relocation
Typical mobility focus areas
Tax Immigration
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Common transaction issues and challenges Interdependencies
Systems Corporate tax/ legal entity
Redundancies Corporate functions Leadership changes
Functional interdependencies
Workforce planning/ talent management
HR – rewards, benefits, etc.
Finance – accounting
payroll
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Some of mobility’s top goals?
Top goals
Ensure all foreign employees retain their immigration and work status with minimal disruption for these employees and their families
Company and employee compliance with
government notification requirements
Identify future improvement opportunities and best practices
Employee experience – proactively communicate changes required to support separation/acquisition with a special focus on top executive talent
Assist leadership in bringing resolution to any outstanding tax compliance or risk matters involving the globally mobile population
Avoiding surprises to employees and to the
business
Microsoft – acquisition
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Acquisition: Microsoft case study
Slide courtesy of Microsoft
Page 11
Acquisition: Microsoft case study
Slide courtesy of Microsoft
Page 12
Acquisition: Microsoft case study
Slide courtesy of Microsoft
eBay – separation
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eBay case study – eBay/PayPal Separation
Successful merger Successful separation
eBay PayPal eBay PayPal
October 2002 17 July 2015
Slide courtesy of eBay
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Separation: eBay case study Primary focuses
Project planning
Employee communication
Clone and Go
approach
Execution
Slide courtesy of eBay
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Separation: eBay case study Project planning
► Project planning ► General PM approach ► Identify departmental
interdependencies ► Map out execution timeline ► RIF management ► Identify compliance risks ► Vendor issues
Slide courtesy of eBay
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Separation: eBay case study Employee communication
Employee communication ► Transparency ► Planned, targeted, regular
communication ► Increased leadership/executive
presence ► Branding ► Logistics ► Compensation and benefits
► The human element ► Emotional experience ► Change management discussions ► Team and Office activities
Slide courtesy of eBay
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Separation: eBay case study Execution
Execution ► Global business stand-ups ► FP&A alignment ► Data transition and
retention ► Vendor implementations ► Testing (internal and
external systems) ► Compliance management ► Mobility team cross training
Slide courtesy of eBay
Bayer – spin-off
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Spin-off: Bayer case study Going forward as two separate companies
Life Sciences
• High and further increasing investment requirements in R&D and commercialization
• Funding needs for inorganic growth to participate in industry consolidation
• Significant investments into capacity expansions
• Continuous need for significant capacity expansions to maintain scale
• Need for further production process improvements to maintain cost leadership
• Opportunity for more active portfolio management
MaterialScience
Funding of high investment needs in Life Sciences, with consistently better returns, limits the availability of resources for MaterialScience New to develop its own leadership position and portfolio. !
Slide courtesy of Bayer
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Spin-off: Bayer case study Proportion of sales, profit, workforce, assignees - Key data 2014
North America 22%**
38%** Asia/Pacific
28%**
SALES worldwide
€ 11.7 bn 28%*
America, Africa, Middle East
12%**
Workforce 17.000 empl
14%*
PROFIT € 1.19 bn***
14%*
* % in comparison with Bayer before carve out
** % of Total Sales *** Earnings before interest, taxes,
depreciation and amortization (EBITDA) excluding non-recurring items
Assignees 250 20%*
Europe
Slide courtesy of Bayer
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Spin-off: Bayer case study Carve out – key elements
► Business Market Leader 2015 – very profitable year Positive spirit in company Experience with Lanxess carve-out in 2005
► Short timeline – announcement in Oct 2014
► No business disruption
Polyurethanes Polycarbonates Coatings Basic chemicals
► HR/Mobility specific One global HR system One unique relocation provider
► Many cross-subgroup moves ► Mobility Project on-going
Slide courtesy of Bayer
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Spin-off: Bayer case study Carve out – approach
► Business ► Independent company on Sept 1st 2015 ► IPO started on Oct 2nd 2015 ► Clone & Go approach ► Operational readiness as main goal with focus on 3 pillars: Process, IT
and organisation
► HR/Mobility specifics ► Duplicate contracts with all external providers for continuity (max. 2 years) ► Develop HR organisation following Bayer structure with Local Mobility
contacts ► Copy all relevant assignees to the new global system ► Align billing procedure with accounting
Slide courtesy of Bayer
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Spin-off: Bayer case study Carve out – challenges
► Business ► New organisation with proper expertise – 800 positions to be filled ► Data privacy regulation between Bayer and Covestro
► HR/Mobility specifics: ► On-going Mobility project at Bayer ► Completeness of vendor agreements ► Get clear authorisation list with assignees transferred ► Update of work permit – late registration ► Communication to expatriates
Slide courtesy of Bayer
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Spin-off: Bayer case study Bayer Mobility project – main challenge
► Prioritization 1. Operational readiness 2. Compliance 3. Strategy
2015 Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Jan
Phase 1 Phase 2 Phase 3
01/09/2015
Design Implementation Policy review
New billing process
Global Compensation Management
Activity
1
2
3
Slide courtesy of Bayer
Questions?