Treasurer’s top of mind: A treasurer’s role in mergers, acquisitions & divestitures

In this article, we’ll share some key takeaways from the most recent Taulia Treasury roundtable on mergers, acquisitions, and divestitures.

The roundtable discussion opened with a description of the host’s experience in mergers and acquisitions (M&A). It was noted how treasurers play a crucial role in ensuring the success of these transactions. No two deals are alike, and it is easy to lose institutional knowledge over time. The lively discussion detailed the importance of treasury involvement and expertise when it comes to M&A.

No two deals are alike, be prepared and nimble

Each deal is unique and requires treasurers to be prepared and adaptable. It’s important for treasurers to be brought into the loop early on. A treasurer’s understanding of the impact that a merger, acquisition, or joint venture will have on the company’s debt and capital structure is valuable.

Knowledge and record keeping

Treasurers should have in-depth knowledge of the deal details, especially during the NDA period when very few people can know about the deal. Maintaining records, org charts, and financing model iterations as if preparing for due diligence is a best practice. The speed of a treasurer’s responses to information requests can often dictate how quickly a deal can move forwards.

Empower team members with information

Treasurers frequently become the data epicenter for deals. It’s important that treasurers empower their teams with information to support the transaction. Team members’ ability to identify and solve deal issues can only be leveraged if they have access to the relevant information.

Strong communication with tax teams

Tax teams typically know the legal entity organization chart and numbers that can both inform and complicate a treasurer’s role during a deal cycle. It is a best practice for treasurers to maintain strong communications with their tax teams during a deal cycle.

Deal financing

Treasurers’ knowledge of how a deal will be financed is critical. It is also crucial for treasurers to be aware of risks related to revolver, commercial paper, or other forms of short-term deal financing. Deal delays can happen. Having more permanent plans in place to finance a merger and acquisition is considered a best practice.

Deal integration

How companies will integrate their banking and supply chain structures can make or break a deal. Awareness of important dates, such as when Technical Services Agreements end, is key.

Until systems are integrated, infrastructure collaborations may be left unrealized. In every deal, there is a tradeoff between changing processes quickly and the risk of business disruption. Deal integration is a marathon rather than a sprint. Each company should develop strategies that achieve the balance they desire.

Similar to systems integration, changing bank structures takes time, and redirecting customers’ payments post-close is often challenging. Collections may need to stay with a certain bank for contractual purposes. Often, it can make sense to maintain separate bank accounts for several months post-close. Sweep structures can be a good option during this period. A good best practice is to isolate account activity related to an acquired business to be able to redirect it over time.

Use of proceeds and deal costs

The responsibility of treasurers typically includes internal communication of the restrictions and agreements surrounding the use of proceeds. Certain loan covenants, for example, may restrict what a company can and cannot do. Similarly, it is a treasurer’s responsibility to account for the impact on cash balances deal fees for consultants, banks, and bonus payouts will have.

Relationships rule

The relationship between counterparts makes deals happen quickly, and integrations succeed. The benefit of speaking to counterparts as specialists and discussing what the future will look like cannot be understated. Ultimately both treasury teams want each other to succeed.

The Taulia Treasurers’ Club is an exclusive forum for Taulia treasurer customers to network, have engaging conversations with like-minded peers on topics that are top of mind, challenge each other’s thinking and share best practices. The topics are driven by treasurers for treasurers. Sign-up for our treasure’s club to learn more.