how to create economic value in …...savings: competitive sourcing example 12 24 36 48...

www.leaseaccelerator.com

THE LEADER IN ENTERPRISE

LEASE ACCOUNTING SOFTWARE

© 2020 LeaseAccelerator Inc.

HOW TO CREATE ECONOMIC VALUE IN UNCERTAIN

WORLD MARKETS

Generate free cash flow benefits and PL bottom line

savings from an “orphaned” spend category

Ingemar LaneviVP & GM of Global Lease Sourcing Solutions

LeaseAccelerator

http://www.leaseaccelerator.com/


Today’s Agenda

01

02

03

Introduction

Free cash flow and the “orphaned” spend category

Value of leasing explained

04

05

Understanding the lease rate factor

Q&A

© 2020 LeaseAccelerator Inc. Page 2


Today’s Presenter

Ingemar Lanevi

VP & GM Global Lease Sourcing Solutions

Ingemar is Vice President & General Manager of

Global Lease Sourcing Solutions. He is responsible

for building out LeaseAccelerator’s Lease Sourcing

business and growing the Global Lessor Network,

LeaseAccelerator’s marketplace for competitive

sourcing equipment financing.

Prior to LeaseAccelerator, Ingemar gained over 25

years of experience leading finance, treasury,

leasing, and strategy functions, at companies

including NetApp. At NetApp, he founded a captive

lease program, called NetApp Capital Solutions, that

he grew into a $500 million plus business. In

addition, he started a lessee program within NetApp

to stop the large upfront capital outlay for acquiring

assets needed to run the company to accelerate the

free cash flow generation.


Potential Savings

How about saving $1.7M in free cash flow?

How about adding $245K to Net Income?


Introducing LeaseAccelerator

SaaS Platform

The Only Integrated Global Lease Services PlatformAutomated, end-to-end lease lifecycle management across equipment and real

estate, designed to help you optimize your cash flow.


Management: Cash is King But We Must Invest

Cash flow from operations – capital expenditures = Free Cash Flow (FCF)

Free Cash Flow

+ Property + Plant + Equipment


Management: Cash is King But We Must Invest

Cash flow from operations – capital expenditures = Free Cash Flow (FCF)

Equipment Leasing

Free Cash Flow

+ Property + Plant + Equipment


New Accounting Standards: FCF Opportunity

Leasing

Data

Debits &

Credits

INPUTS OUTPUTS

We can now identify:

• Savings by asset type

• Consolidation opportunities

• Leases expiring

• Leases in evergreen

Cost

Centers

Leasing

Spend

Cube


Equipment Leasing Problems: Overpayments

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Example – 36 Month Lease

Can’t return equipment on time:

evergreen payments

Can’t find leased equipment:

forced buyout

Insufficient competitive bidding: monopoly rents

Use leasing company’s lease agreement:

performance penalties

Lack of automation: slow, complex manual process with high, hidden

administrative costs


12 24 36 48

Return equipment on-time

Competitive bidding for all leases: lowest cost

Standardize lease agreement for all asset

classes by country

Automate the end-to-end global process using LeaseAccelerator SaaS &

Engage cross-functional expertise

How to Turn CapEx into Cash using Leasing

Track assets during term

Report on stakeholder performance

✓ Protect Cash

✓ More Free Cash Flow

✓ Fast

✓ Easy

✓ No Overpayments

Procurement teams don’t have the time, people, or money to do this on their own.


Automated Lease Sourcing Process: LeaseAccelerator

GENERATE

RFP

LEASE VS

BUY ANALYSIS

EQUIPMENT FINANCE – AUTOMATED CAPITAL SOURCING PROCESS

Compare lease vs buy

options by analyzing

NPV, state and federal

taxes, monthly and

annual cash flows

AWARD

BUSINESS

COMPETITIVE

BIDDING

MATCH

LESSORS

Match to lessors based

upon credit profile,

asset type, ticket size

and geographic

location

Request bids from your

preferred lessors or

new funding sources

on Global Lessor

Network

Stack rank bids based

upon Present Value,

Cash Flow or Internal

Rate of Return. Select a

winning bid.

STANDARDIZED

CONTRACT

Negotiate using your

preferred contract or our

standardized Master

Lease Agreement,

Schedule and Rider

Specify equipment

make/model, desired

term, currency, payment

schedule and end of

term options

Savings: 7% Achieved through Competitive Bidding with Expert Global Transaction Support


It’s Now Simple, Fast, & Easy to Compete Leases

500 Banks, Vendor Captives and

Independent Lessors

Equipment

Financing

RFP


Material Handling Vehicles

A Fortune 150 customer wanted a lease line for material handling equipment. They utilized our Global

Lessor Network marketplace for competitive lease bids for extensive lease structures, including

splitting it between 1,000 and 2,000-hour usage. The event was a great success and the winning lessor

offered the same price for both usage scenarios. The savings were significant at $3.3M or 15.8%.

Amount Financed: $25,000,000

Term/Structure: 36 & 48-Months Lease with FMV and EOT options

Buyout, Renewal, Renewal with a Fixed 12 Month

Reduced Price and Return

Proposals Received: 9

Savings = Average Bid - Award Bid


Savings: Competitive Sourcing Example

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($3.1M) ($3.1M) ($3.1M)

6.5% $216K $216K $216k

Savings from competitive bidding

CapEx Spend: $10M Original Equipment Cost

Lease Term: 36 months

($3.1M)

Savings from timely end of term

management

$3.1M

Payments

Overpaymentdue to late

return

$648,000


Context of Live Example

• $1.2B revenue company

• $10M IT equipment lease portfolio

Two different Equipment Lease Sourcing strategies

1. Captive lease strategy

2. Competitive marketplace strategy


Comparative Lease Strategy Results

IT Equipment Lease portfolio

Average Term

Monthly Lease Payment

Financial Benefits and Savings

Cash Flow Benefits

Annualized P&L Savings

Competitive

Marketplace

Strategy

$10,000,000

36 months

$239,362

$2,310,606

$460,991

Delta

($17,988)

$577,857

$215,856

Captive

Lease

Strategy

$10,000,000

36 months

$257,350

$1,732,750

$245,134


The Power of the LeaseAccelerator Marketplace!


How to Analyze a Lease Rate Factor (LRF)

Prospective Lessor bid for a Forklift lease

• Initial purchase price of the forklift (PV)—$25,000

• LRF—2.87%

• Term of the lease (nper)—36 months, with one payment per month

• Payment timing (type)—advance


How to Analyze a Lease Rate Factor (LRF)

With rate determined, the only variable missing in the Excel PMT formula is the residual value.

The PMT formula looks like: =PMT(.05/12,36,25000,fv,1)

where

• rate = 5%/12

• nper = 36

• pv = $25,000

• type = advance, which is represented by a 1 in Excel (arrears would be represented by 0)


Goal Seek Function

With all these considerations, the Goal Seek formula would look like this before running the analysis:


Goal Seek Function

The result is that the quoted LRF is made up of 5% cost of funds and a

4.46% residual. Not a big residual and hence not a very good LRF!


Recipe for a “Best-in-Class” Lease Program

1. Establish a centralized owner for the global lease program to hold all stakeholders accountable

for their actions supported by Policy and Procedures. Organize global shared service to

centralize and simply management, process, controls, accountability, and reporting.

2. Standardize the Lease vs Buy process on the front end and apply consistent corporate rates to

determine the ideal acquisition method. This is a strong demand management tool.

3. Apply a standardized leasing process from beginning to end with pro-active management

throughout the lease lifecycle, once decision to lease is made.

4. Apply a common lease deal structure for new leases based on asset class that will

reduce/minimize the downstream compliance and financial risks

5. Standardize up front the end of term options to maximize flexibility and value at end of the term

6. Capture all relevant deal information up front to ensure an accurate lease portfolio that will allow

for proper business intelligence, analytics, system communications and continuity of ownership

and accountability downstream

7. Ensure pro-active management of all leases to make timely EOT decisions


How to Drive Value with Leasing?

1. Compete every new lease with standardized leasing terms to control for financial risks

• Fair market value leases = lowest Total Cost of Ownership (TOC)

• Dollar out leases = lowest market rate

2. Return every asset at EOT on-time

These two performance-based outcomes maximize the contracted economic

benefit. This is achievable with a centralized global managed shared service

(aka Center of Excellence).


Would You Like to Learn More?

If you would like to learn more

about how LeaseAccelerator can

help your organization, please

answer ‘Yes’ to the final polling

question and I will contact you

directly.

Special Offer for the first 5 responses:

One Free Equipment Lease

Sourcing Event!

Ingemar LaneviVP & GM Global Lease Sourcing Solutions

[email protected]


Questions?

Ingemar LaneviVP & GM Global Lease Sourcing Solutions

[email protected]

THANK YOUQUESTIONS?

LeaseAccelerator LeaseAccelerator @LeaseAccelerate LeaseAccelerator

www.leaseaccelerator.com


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