Deloitte Site Selection Presentation

SelectUSA RoadshowSite Selection ConsiderationsKey Issues for Nordic Investors in the USA

September, 2015

USA Overview

Copyright © 2015 Deloitte Development LLC. All rights reserved 3

Population Density

Population by State (Mil.)9.0 to 40.0 5.5 to 8.93.0 to 5.51.4 to 2.90.0 to 1.3

Source: 2014 Census Bureau Population Estimates

Approximately 60% of the population is east of the Mississippi River, however migration to

the South and West continues


Innovation Clusters

Mature clusters are primarily located on the coasts, however clusters are emerging in many

non-traditional locations Innovation Clusters

Source: Innovation Cities 2014 Index of U.S. Cities

Emerging Innovation ClusterMature Innovation Cluster

Seattle

Portland

Bay Area

Los Angeles

San Diego

Denver

Austin

Dallas

Houston

Kansas City

Minneapolis

Chicago

Ann Arbor

Miami

OrlandoTampa

Atlanta

Research Triangle

Pittsburgh

Richmond

Washington D.C. Baltimore

Boston

Providence

Philadelphia

New York


Right to Work States

Regulations allow for flexibility regarding workforce and unionization

Right to Work LegislationRight to Work ApprovedNon-Right to Work

Source: National Right to Work Legal Defense Foundation


Single Factor Tax States

States offering tax structures which determine liability based solely on sales within the state

are attractive for producers of high-margin products and servicesDeloitte Presence

Source: Federation of Tax Administrators

Single Sales FactorDouble Weighted SalesNo Sales TaxOther Sales Tax Apportionment

Investment Vehicle Selection


Foreign investors typically need to make three strategic decisions in selecting the most

appropriate investment vehicle

Foreign Investment Overview

Equity

Non-equity

Decision 1 Decision 2 Decision 3

Whole

owned/ JV

Technology

Capital

Investment?

Greenfield/

M&A

Greenfield

M&A

Wholly-Owned

Greenfield

Investment

Wholly-Owned

Acquisition of

Local Firm

Greenfield

Investment

Equity/

Non-equity

Exclusive

Supply

Arrangement

Partner with

Current

Suppliers

Joint-venture

Wholly-owned

Yes

No

Joint-venture

JV parents’

Existing

Business

Decision

Partnership

Agreement

Investment

Vehicle

Legend

Site Selection Process


Value Creation Opportunity

A skilled local labor market that is scalable and

sustainable

Quality of local environment to attract best talent

Optimal tax environment

Access to markets

Protection of intellectual property

Minimized and mitigated development risk,

including permitting, environmental, labor-

management relations, and natural disaster risk

Availability of suitable real estate and

infrastructure

Statutory and discretionary incentives that are

fungible, executable, and valuable

Confidentiality maintained until client is ready to

announce the project

Lack of a rigorous site selection, due diligence,

and negotiations process

Insufficient labor analysis

Studying the wrong location factors

Limited tax and incentives knowledge

Limited relationships and leverage during

incentives negotiations

Allowing the location decision to be driven by the

real estate transaction

Appropriate level of funding for the process

Confidentiality breached

Obstacles to Achieving Value

An approach and methodology

should be developed to overcome

each of these obstacles

Value Drivers in the Location Decision

Significant value can be achieved by optimizing the location decision


Ph

ase

Acti

vit

ies

Conduct kick-off

workshop

Establish guiding

principles

Determine critical

location factors (CLFs)

Define search area to

be considered

Conduct stakeholder

interviews

Confirm project timing

and milestones

Conduct Initial

screening, evaluation,

and assessment of

search areas

Collect key data from

candidate investment

zones

Develop cost and

conditions framework

using weighted critical

location factors

Conduct incentives

research

Conduct confidential

due diligence in short-

list locations

Interview companies

and universities

Review real estate

opportunities

Inspect infrastructure

Review regulatory and

legal climate

Refine costs and

conditions analysis

Position project with

local officials

Conduct confidential

executive tours

Develop negotiations

strategy

Develop and publish

incentives RFP for

state/local entities

Conduct detailed

negotiations (multiple

rounds)

Obtain commitments on

deal structuring

Draft Memorandum of

Understanding (MOU)

Develop document

checklist and process

maps

Assist in completion of

required documentation

Facilitate

implementation planning

for HR, IT, Finance,

Tax, Supply Chain,

Operations, and other

operating units

Resu

lts

Project specifications

Critical location factors

Project timeline

Long-list of top

candidate locations

Comparative cost and

conditions summary of

long-list candidates

Short-list of locations for

field due diligence

Site summaries

Labor market

evaluations

Updated cost and

conditions summaries

Preferred option(s) for

negotiations

Negotiated incentives

Incentives MOU

Lease/purchase

agreement

Implementation plan

Resource plan

Site Selection Process

A phased approach to objectively narrow down the list of locations based on your key

decision drivers is recommended

Assess Validate Negotiate ImplementDiscover


Location Evaluation Framework

Talent Scalability and Sustainability

Availability of relevant skills and talent

Language capabilities

Ability to attract management talent

Population and workforce growth trends

Competitive environment and attrition

Educational attainment and talent pipeline

Character of Life

Quality of life for expats

Presence of international schools

Personal tax environment

Risk

Natural disaster

Political stability

Macroeconomic stability

Crime and corruption

Currency risk

Business Environment

Bureaucracy

Labor relations

Incentives availability

Government support (non-financial)

Tax environment complexity

Accessibility

Flight access/frequency to key destinations

Time zone differential

Quality of and access to airport

Real Estate and Infrastructure

Real estate availability and quality

Infrastructure quality and reliability

Road network and public transport for

commutingPrecedent for Similar Investment

Presence of similar operations

Presence of key competitors

Strategic Relevance

Proximity to relevant operations

Co-location benefits (culture, knowledge)

Economic Factors

Workforce (salaries and benefits)

Facilities (one-time and ongoing)

Real estate

Utilities (electricity, natural gas, water)

Logistics

Tax (state and local)

Incentives

Operating Environment Variable Costs

Operating conditions and economic factors should be evaluated and trade-offs balanced

Available Incentives


Hard $

Soft $

One-Time $ Ongoing $

Zoning variations

Expedited permitting

Road improvements

Relocation assistance

Temporary space

Low interest loans/financing

Hiring assistance

Training support

Employee support

Tax increment financing

Property tax abatements

Income tax credits

Reduced utility rates

Free Trade Zone designations

Withholding tax

abatements/refunds

Cash grants

Free site

Site preparation costs

Utility infrastructure

Waiver of utility tap fees

Utility connections

Training center construction

Forgivable loans

Sales/use tax exemptions

Incentives Negotiations

Successful incentives negotiations are dependent upon the development of competitive

leverage and understanding of state and local programs


Sample Incentives Available in the Marketplace

Relocation Assistance

Personnel Relocation

Machinery & Equipment Relocation

Cash Grants

Customized Training

Instruction

Materials

Space/facility

Travel

Wages

Hiring Assistance

Recruiting

Testing

Screening

Other

• Permitting Assistance

• Transition Space

• Enterprise/Free Trade Zones

• Expat relocation assistance

• Local Discounts

• Special Air Fares

• Daycare

• Tuition

Ad Valorem/Property Tax Abatements

Realty/Facility

Machinery & Equipment

Pollution Control

Inventory

Payment-in-Lieu

Corporate Income Tax Credits

Job Creation-Based

Payroll-Based

Investment-Based

Sales/Use or VAT Tax Exemptions

Machinery & Equipment

Pollution Control

Energy/Fuels

Building Materials

Other facility purchases

Land Acquisition

Free/Reduced Cost

Free Testing/Environmental Review

Zoning/Covenant Variances

– Clearing

– Grading

– Landscaping

– Drainage

Creative Options

Creative Terms/Financing

Facility Financing

Low-interest Government Funds

Bonds (Taxable/Tax Free)

Interest Rate Buy Down

Tax Increment Financing

Creative Leases/Buy Backs

Infrastructure Assistance

Utility Extensions/Enhancements

– Capacity upgrades

– Dual feed infrastructure

– Rate reductions

Rail and Highway Extensions

Road Improvements

Tax-Related Site / Infrastructure Related HR / Other

Mistakes to Avoid in Site Selection


Common Mistakes

Unprepared site selection team…multi-disciplinary team required

Lack of executive consensus…communicate early and often

Incorrect search area…think bigger

Narrowing the search area too rapidly…be conservative

Failure to consider all issues…think broadly and be balanced

Incomplete labor market analysis…consider all factors

Failure to consider community trends…understand the long-term

Poor or absent technical site review…do your homework

Breach of confidentiality…discretion is key

Failure to capture negotiable incentives…don’t be afraid to ask

Acceptance of overvalued incentives…quality not quantity

Poor implementation of incentives…get what you deserve

Why Deloitte


Location Strategy Leader

Deloitte’s Capabilities

Over 8,000 site selection projects completed

since practice founding in 1919

Largest site selection consultancy built to advise

clients in the most complex location strategy and

site selection decisions

Deep understanding of issues critical to optimal

location decisions:

− Variable operating costs, conditions, and risks

− Labor market quality and availability

− Logistics/supply chain/infrastructure issues

− Utilities infrastructure and energy management

issues

− Real estate and site issues

− Taxes and incentives

− Business Climate, Regulations and Risks

– Reduced Operating Costs

– Enhanced Operating Environment

– Augmented Government Incentives

– Lowered Risks

– Faster Execution

– Effective Operational Footprint

Deloitte Delivers Client Results

Market Entry

Site Selection &

Location

Strategy

Real Estate &

Incentives

On-shoring &

Off-shoring

Footprint

Optimization

Program Delivery

& Management

(PMO)

Our Services

Deloitte is the global leader in Location Strategy, helping clients align business strategies

with right geographies


Matt SzuhajDirector

Deloitte Consulting LLP

+1.415.783.4268

[email protected]

Relevant Experience

Matt Szuhaj, a Director based in our San Francisco office, was a founding member of Deloitte Consulting’s Real

Estate and Location Strategy (“RE&LS”) practice. He has twenty three years of experience in domestic and

international site selection and development, specializing in global deployment strategy, market entry, real estate and

site evaluations, infrastructure review, operating costs/conditions analysis, and business incentive and entitlement

negotiations . Matt has managed and performed global strategies for numerous corporate clients across the functional

spectrum including manufacturing, distribution operations, shared service centers, call centers, R&D facilities, and

headquarters for projects throughout the Americas, Europe, and Asia.

Representative Clients

AAA, Affymetrix, AK Steel, Amgen, Applied Biosystems, Baxter, BioMarin, Bridgestone, Cintas, Cordis, Core Materials,

Dendreon, Disney Store, eBay, Edwards LifeSciences, Express Scripts, Galaxy Aerospace, Genentech, Guidant,

Herbalife, ICI, Invitrogen, J&J, Lenscrafters, Life Technologies, Mattel, Medrad, Merck, Metalpha, Michelin, Morgan

Stanley, Motorola, Nestle, Nike, Novartis, OSI Pharmaceuticals, Palm/US Robotics, Perrigo, Peugeot, Porsche,

Republic Steel, Rheem, RPC, Roche, Stryker, Shurfine, Sun Microsystems, Teva, The Gap, UPM-Kymmene, and

Western Auto

Education

B.S. in Construction Engineering and Management from Purdue University

MBA in Finance and Real Estate from Indiana University

About Deloitte

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Deloitte Site Selection Presentation

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