Integrating a new acquisition or spinning off a business unit requires institutional knowledge and a systematic approach.
In the wake of a slew of mergers and divestitures in the past several years, many a treasurer has been left with the task of integrating or dividing treasury operations, sometimes with little warning. One member of The NeuGroup’s Global Cash and Banking (GCBG) group shared her company’s experience in how best to carry out these seemingly monumental tasks and what hurdles to be on the lookout for in the process.
According to this member, a systematic approach can make all the difference when integrating a new company or separating from one. It’s critical at the earliest opportunity to gather vital technical, functional and process details needed to expedite integration/separation efforts. In this it’s also a good idea to bring to bear treasury’s broad knowledge of finance along with treasury’s different finance processes. Also dig into the institutional knowledge of the team and create cross-functional groups that can quickly integrate or divest a business leveraging on past experiences.
In all of this practitioners should focus on processes rather than functions. A process-driven solution ensures greater success and drives shorter implementation timelines. It also allows the ability to clearly identify cross-functional work streams with defined roles and responsibilities. Each work stream has representatives from each functional area and manages all key decisions.
Institutional knowledge can come from within or without (via peers) but in this company’s case, it made a point of building on lessons learned from past integrations. One of the ways the company keeps expanding its institutional knowledge is through an ever growing list of questions it compiles that allows it to (i) understand the scope and complexity of each transaction; (ii) articulate legal, tax and accounting requirements; and (iii) clarify treasury and investment needs.
The knowledge of your peers in the industry can also be very helpful. While most acquisitions have their obvious company specific issues, some top lessons can be applicable to cash managers in other corporates and can guide a company in building a model that is tailored to is needs and which can also, if possible, be used from a global perspective.
Here are some universal guidelines:
- Gain “buy in” from upper management and educate key teams to ensure critical resources are available for each deal
- Every transaction is unique and “small” does not necessarily translate to “easy.”
- Look outside of Treasury and include critical areas of finance & non finance (i.e., legal/office of the secretary-provides critical documentation for banking)
- Develop resource tools such as a questionnaire by work stream, deal sheet and contact list and update them on a regular basis
- When possible, retain key employees from acquired company (S/T & L/T) and meet with SMEs early on and often in person
- Ensure good knowledge-transfer occurs and key documentation is retained or archived properly from acquired company
M&A activity will remain strong as long as companies – particularly in tech – continue building cash reserves in the current low-interest rate environment; at present, M&A seems to be the place treasurers see as the best use for their excess cash. In this context, treasury managers will continue to be occupied with integration and separation projects. The sooner they set up a systematic model to deal with them that can also build upon the learnings of each transaction, the easier the management of these projects will become.