DOCUMENTEX

You are Charlie Murray, a financial consultant, working in the consulting practice of the large international professional services firm ABC & Co. You specialise in dealing with multinational companies and helping them establish and set up new operations. It is August 2015 and you are sitting in a hotel lobby waiting to meet Sandra Carey. Sandra is the Chief Operations Officer (COO) of Documentex Inc (DOCUMENTEX), a US company headquartered in San Francisco, which sells its proprietary document-productivity software to its client base. You read again the briefing notes on DOCUMENTEX prepared by one of the analysts that works with you (Appendix I).

Sandra has been in Ireland for the past week, attending the Global Web Summit, and she contacted you to arrange to meet up before she returns to the US. Sandra arrives and outlines why she wanted to meet with you.

Hi Charlie, great to see you and thanks for meeting me at short notice! The past few days have been a bit of a blur. The Summit has been awesome. To be honest I was surprised at how much things have changed in Ireland in such a short space of time. I have been really impressed with the dynamism of the companies I have met and surprised at how quickly they look to go global and set up bases outside of their home market. It got me thinking about DOCUMENTEX and our global ambitions.

Sandra continues: Most of our customers are in the US, but we have a small and growing customer base in Europe. Our revenue for European customers is currently US$ 5 million but we think there is huge potential to grow this. We currently do not have any employees in Europe. Our European customers are serviced by third-party resellers, who get commission based on sales. The resellers are managed by a small team of 12 people based in San Francisco. This works reasonably well for us but our customer satisfaction ratings in Europe are lower than in the US: 80% for Europe compared to 96% for the US.

Sandra goes on to say: One of the ideas I have been considering is establishing a European HQ for DOCUMENTEX here in Ireland. From here we could manage sales and customer service. I am convinced this would lead to accelerated growth in Europe. In the longer term we could also undertake some product development here as there may be some tax structures that we could avail of. I have spoken to our CEO about it. While he agrees in principle that its a good idea, he is not convinced that DOCUMENTEX has the scale to make it work at the moment. However, he is prepared to look at it and has asked me to prepare a high-level business case setting out the costs and benefits over a three-year period. He doesnt think there is much point looking out beyond three years given the amount of change in the tech sector.

Thats the reason I wanted to meet you! I would like to engage your firm to help me with the preparation of the business case, outlining the key strategic and operational factors relevant to such a decision. I would like this to include a financial analysis, in US dollars (US$) of course, comparing the options of setting up a European HQ and continuing to service Europe from the US.

As Sandra hands you a document (see Appendix II) she continues to say: During the week I pulled together a schedule of notes based on conversations I had with a number of tech companies based in Ireland and also with the IDA Ireland/Invest NI. I would be grateful if you could pull together the analysis over the next few days as I will be meeting our CEO to discuss this matter within the week. Use whatever you think is relevant.

You thank Sandra for the opportunity to help her with this interesting and important initiative and go back to the office to start work immediately.

APPENDIX I: BRIEFING NOTE ON DOCUMENTEX

DOCUMENTEX is a fast-growing US company based in San Francisco engaged in the development of innovative document productivity software which is sold/licensed to small and medium-sized businesses.

DOCUMENTEX was established four years ago by Ben Goldman, who left his job as VP Product Design with the market leader. DOCUMENTEX has been successful in the US market through a strong focus on tablet/mobile devices and superior customer service. Goldmans previous employer has claimed patent infringement and initiated legal action for unauthorised use of its Intellectual Property rights.

DOCUMENTEX has, twice since start up, raised equity through venture capital funding and there has been speculation on Wall Street that it may seek a listing on NASDAQ.

DOCUMENTEX earned net income of US$ 15 million on revenues of $50 million in 2014. It has grown its customer base quickly and currently has 60,000 customers. These are predominantly small and medium- sized service businesses. DOCUMENTEX is particularly strong in the professional services market (law firms and accountancy firms).

DOCUMENTEX expanded into the European market two years ago. It signed up a network of resellers on a commission basis. The resellers are mainly locally based suppliers of office products.

APPENDIX II: SCHEDULE OF NOTES PREPARED BY SANDRA CAREY, COO. DOCUMENTEX

Current European revenues ($ 000)	Option A: Set up European HQ 5,000	Option B: Continue to service from the US 5,000
Forecast growth rate from Year 2
onwards	30%	10%
Gross margin	60%	60%
Headcount required	40	12
Average payroll cost per employee per
annum	40,000	$ 50,000
Reseller commission	n/a	20%
Hiring cost as % of salary	10%	15%
Rental costs per annum	$ 300,000	n/a
	20 years
	(with 5-year break
Standard lease term	clause)	n/a
Set-up costs (professional fees and
other costs)	$ 250,000	n/a
Corporation tax rate	12.5%	25%
US$ / / exchange rate	$ 1.3 = 1	$ 1.3 = 1
DOCUMENTEX investment US$ discount
factor	10%	10%
Time zone	GMT	GMT -8
Availability of technically skilled labour	medium	Excellent
Current interest rates	1%	2%