Business Model Optimization Creating value through business transformation

Linking global operational and tax strategies for sustainable value

Your opportunity During an economic downturn, many multinational businesses turn their primary focus to cost containment and working to achieve the best possible profit margins. During an economic boom, many of these same companies look for ways to enhance their margins and grow the business. Accordingly, whether in a slow or booming economy, it is always a good time to review your global business model and ask the question, How can you create value by pursuing new marketshare, developing new markets, and gaining greater economies of scale? There are many ways in which to create value in an organization, including: Undertaking operational initiatives to pursue revenue and margin growth Evaluating rationalization of the supply chain Integrating acquisitions with existing structures Centralizing management and the use of remove intellectual property (IP) Centralizing management, regionally or globally As you evaluate these and other types of business transformations, are you considering all of the relevant factors that may help build value within your organization, such as the opportunities and effect of tax on these important business initiatives? Deloitte brings a fresh perspective. Our approach Our Business Model Optimization (BMO) service offering focuses on helping multinational companies integrate their operational and tax planning in a scalable and sustainable way to help business leaders make more effective decisions on an after-tax basis.
As used in this document, Deloitte means Deloitte LLP. Please see www.deloitte.com/us/ about for a detailed description of the legal structure of Deloitte LLP and its subsidiaries. Certain services may not be available to attest clients under the rules and regulations of public accounting.

there, done that experience in terms of aligning business models, intellectual property practices, and global tax planning. Our BMO integrated multidisciplinary team includes specialists in business transformation, information technology (IT), human resources, direct and indirect tax, and project management. Using established and proven methodologies and tools, our BMO team focuses on the following elements, or work streams, of opportunity: Realigning for business transformation we help companies explore wholesale changes or small refinements in their existing business model, from sourcing of raw materials to sales of finished goods (and everything in between), and related changes to support the new business model. Reconfiguring IT systems we help you explore, design, and implement infrastructure and IT system changes to support the new business model. Readying Human Resources a key to the sustainability of any business transformation is having the right people in the right place. The focus here is on helping you design and carry out personnel changes intended to support the new business model and develop a smooth transition to the new model. This work stream may also include developing new key performance indicators and reporting lines to support the new business model, as well as helping to navigate the change process through employee representatives. Reorganizing legal, finance, and tax structure with BMO initiatives, there are often extensive legal entity and tax structural changes. We help your management team focus on the pros and cons of various options and provide support in helping you implement the new structure. We will consult on income tax and transfer pricing matters for the new business model, and will help analyze the effect, if any, of indirect taxes on the new model. Deloitte recognizes that wholesale change often is very disruptive to an organization, its suppliers, its customers, and other stakeholders. Accordingly, where appropriate, we subscribe to the philosophy of a more focused

Our BMO services are delivered by a dedicated crosscompetency, cross-regional team in the United States and through the Deloitte Touche Tohmatsu Limited member firms abroad professionals who have extensive been

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approach aimed at specific areas of improvement that a company has already identified or that our analysis may bring to light, including: Globalization or regionalization of management function Operational changes that enhance revenues and operating margins Centralization of the management of value chain functions and risks Mergers and acquisitions Supply chain rationalization Implementation of global or regional ERP systems Through this measured approach, we provide BMO services efficiently on a regional or global basis. Our process is guided by our four-phased approach which allows a critical business transformation to be carried out in a diligent and cost-effective manner: Feasibility: This phase allows a company to first pursue savings through an opportunity analysis. To the extent the potential savings are substantial, feasibility for a new business model can be determined by: reviewing alternative operating models and understanding the potential for impediments from a business perspective identifying business process opportunities, analyzing location savings opportunities involving the centralization of management or valuable intangible property, and the location of the principal company or the IP company considering significant tax risks and opportunities developing a business case that takes account of the potential for IT changes, relocation of people, and the costs to design and implement the business model along the work streams discussed above

Design: This phase involves the blueprinting of the new operating model and consideration of the operational, tax, and financial implications of the new business model, and the resolution of any critical business and tax issues identified during the feasibility phase. Implementation: This phase involves the conversion of the design blueprint into operating reality. We work sideby-side with the company and its legal counsel on the timely and successful go-live of the new business model and legal structure. Maintenance and monitoring: In this phase, we focus on the conversion Post-go-live review of the new business model to determine the adherence to the planning and protocols embedded in the new processes. Another objective of this phase would be to identify ongoing enhancements to the structure. A few of our engagements include: Specialty chemical manufacturer we helped scope the feasibility of converting the companys European operations into the European Principal Company (EPC) model. As a result of the feasibility study, the client engaged Deloitte to consult on a new EPC business model, prepare the ERP blueprint for the new model, assist with the people relocation efforts, and align tax with the clients legal perspective. Consumer products manufacturer a client was struggling to implement a successful change program throughout its European, Middle Eastern, and African (EMEA) operations. Our BMO team reviewed various operating models with the client, emphasizing the need to look at the model from a holistic perspective, including business issues, systems, people, and tax. Based on the review, the company engaged Deloitte to implement the EPC model for its EMEA operations. Oil and gas manufacturing and services company we worked with the companys vice president of tax to migrate the value of foreign IP to an offshore company to support prioritization of spending, pursue return on investment, and manage global cash flow. The work undertaken included structuring the IP company and the

U.S. tax treatment of the buy-in payments, cost-sharing arrangement, and transfer pricing. It also involved project management related to the legal and valuation consultants who assisted the company. Human resources outsourcing services company we performed an opportunity analysis to help this company evaluate its global business strategy and identify tax planning opportunities, including the potential establishment of an offshore principal company structure for their services business. In addition to international tax and transfer pricing aspects, this project involved state tax, management consulting, and information systems considerations. Consumer products company a client wanted to streamline its European operations by consolidating its category-led business model and two European head offices into a new, single operation in Switzerland. The streamlining focused on redesigning the marketing, sales, procurement, customer service and logistics, operations, and quality functions to operate consistently with the EPC model once the structure goes live. Deloitte Consulting LLP supported this work by investigating efficiency

opportunities and ways to improve the European business processes. Deloitte Tax LLP supported the work from a global tax perspective to enable the new business model and processes to be tax compliant. In addition, IT systems were reconfigured to support the new EPC business processes and the legal and tax structure was reorganized to focus on aligning the legal entity structure to support the new EPC operating model. The EPC model went live smoothly in 13 European countries and in the European operating company. The Deloitte difference In light of todays dynamic global economic environment and the potential for legislative changes, assessing a multinationals global or regional business model may no longer be optional. Our BMO team provides high quality, customized tax and business model transformation services in an efficient manner through the use of common tools and techniques. We have more than 100 dedicated BMO specialists who are experienced with the complexities of implementing new business models and aligning the tax and operating strategy for multinational companies.

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Please contact one of our team members to discuss your specific needs. Andy Newman National Leader International Tax acnewman@deloitte.com +1 312 486 9846 Arin Mitra National Leader Transfer Pricing amitra@deloitte.com +1 202 879 5670 Mid-America Anthony Bellew anbellew@deloitte.com +1 312 486 5216 Midwest Mike Gilson mgilson@deloitte.com +1 312 486 3240 North Central Anthony Bellew anbellew@deloitte.com +1 312 486 5216 Northeast Steven Davis stevendavis@deloitte.com +1 212 436 3340 Northwest Pacific Steve Blore sblore@deloitte.com +1 415 783 4126 Pacific Southwest Philippe Penelle ppenelle@deloitte.com +1 213 553 1994 Southeast Steven Davis stevendavis@deloitte.com +1 212 436 3340 Indirect Tax Michele McGuire mimcguire@deloitte.com +1 312 486 9845 Nigel Mellor nimellor@deloitte.com +1 212 436 7691 Andrew Street astreet@deloitte.com +1 312 486 4625 Washington National Tax Tim Tuerff ttuerff@deloitte.com +1 202 378 5223 Jim Gannon jgannon@deloitte.com +1 202 378 5224 Gretchen Sierra gretchensierra@deloitte.com +1 202 220 2690

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