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Tesla-SolarCity Case Study (Significance of Acquisition (build on core…
Tesla-SolarCity Case Study
Significance of Acquisition
build on core competencies
increased returns/profits
beneficial for stakeholders
provision of better products
better business management
enable companies to provide end-to-end clean energy commodities to clients
drive the sustainability vision forward
the acquisition was propelled by mission of innovation, sustainability and overcoming challenges
criticism of merger
questionable rationale
could distract the management
negatively affect Tesla production goals
bailout of SolarCity that faced potential liquidity issues
Tesla Motors Inc.
Headquarters in Paolo Alto, CA
founded with objective of building sports cars powered by lithium-ion batteries
chairman in 2004 was Elon Musk
Elon Musk became CEO in 2008
Had market capitalization of more than $31 billion in June 30, 2016
Production
primary facility found in Fremont, California
2012-had 2 major electric cars
Model X and Model S
models topped luxury markets in terms of performance and critical reviews
planned to introduce Model 3
lower cost
increase annual production
Gigafactory
projected to be largest producer of lithium-ion batteries
sufficient capacity to supply all batteries
manufacture Tesla Powerwall
rechargeable battery system designed for home energy storage
provided link to Musk's broader vision of sustainable energy future
Elon Musk
visionary
sought to provide consumers with viable alternatives to fossil fuels
developed the 2006 Secret Tesla Motors Master Plan
plan stated that overarching purpose of company was to help expedite move from hydrocarbon economy towards a solar electric economy
build sports car
build affordable car
provide zero emission electric power generation options
led to need for a company devoted to solar power generation
Had 3 important components necessary for sustainable energy future
storage
consumption
generation
SolarCity Corporation
designed & manufactured solar panels
installed more than 230000 solar energy systems
Had SolarLease strategy for customers
install panels at home at no upfront cost
customer would get into 20-year lease agreement with SolarCity
transactions occurred through subsidiaries owned by company
Financing growth
Debt Capital
Short-term bank loans
secured through working capital
Non-recourse longterm bonds
secured through customer lease payments on its solar installations
solar bonds
offered directly to retail clients with interest in making green investments
convertible notes
unsecured
Merger Opportunity
would be beneficial for accelerating advent of sustainable energy
would enable Musk to create an integrated and beautiful solar-roof
facilitate transition to sustainable energy
merger, however, raised various concerns
Interests of Bannister's clients
some had investments in Tesla
some had investments in SolarCity
some held equity positions
some had interest in debt positions