When a tech company undergoes a merger or acquisition, the post-deal integration can be daunting for the CFO and treasurer. M&As create a number of challenges: From disparate ERP systems to differing cash management practices to simply tracking down each entity’s bank accounts.
Effective integration planning is the number-one factor in M&A success.2 Involving finance early will improve the process.
Keep your transition on track with attention to these four critical areas:
1. Understand your new corporate structure
Every situation is unique, and your approach will vary based on the specifics of the deal and your new organization. For example, in a traditional acquisition, the purchased entity will have an existing financial infrastructure that includes bank accounts, systems, and staff, which you can rely on in the early days for continuous operations.
By contrast, a carve-out structure means the new entity may depend on the acquiring company for all treasury management services. If you have a merger of equals, decision-making power may be shared between the two entities or result in one organization in a leadership position.
A copy of your transition services agreement will detail which financial functions the previous owners will maintain during your transition, for how long, and at what cost. Meeting these deadlines will affect your integration timing and costs.
Work with your legal and tax teams to document each legal entity, its tax IDs, bank accounts, authorized signers, and board resolutions. Also, determine how funds will need to flow between your operating units and accounts.
2. Inventory your existing financial systems and bank services
Before making changes, get a clear picture of the ERP, treasury management, and proprietary systems in use for invoicing, receivables, payables, cash management, and reporting. List the payment methods and channels in use (such as web, IVR, and lockbox) and your merchant processing IDs. Finally, determine what’s required to forecast receivables and payables, obtain your daily cash position, and transfer funds among entities.
As you make integration decisions, begin with inconsistent or duplicated tools and processes. Look for web- and cloud-based solutions that can reduce IT costs, and areas where a single bank or provider can support multiple services. Consider also how to create a streamlined experience for customers and suppliers across your enterprise.
3. Tally up your financial responsibilities
Calculate your combined debts, investments, and tax liabilities, and identify where idle cash resides. Review your purchase agreement terms and whether they allow for consolidating debt. Then develop a consistent strategy to eliminate unnecessary borrowing and optimize your working capital.
4. Determine your priorities
Use the information you’ve gathered to define your immediate, short- and long-term priorities. This includes which functions you’ll handle centrally, such as revenue forecasts or investment sweeps, and which you’ll maintain at a subsidiary or local level.
If you plan to consolidate operations to a single ERP system, identify your timeline, budget, and resources for the transition.
While you may encounter M&A activity only a few times in your career, remember, many financial institutions tackle these challenges every week. Early guidance from an experienced bank can help you navigate a potentially overwhelming situation with best practices and real-world examples.
- “2017 BDO Technology Outlook Survey,” BDO USA LLP, 2017.
- Deloitte, “M&A Trends, Year-End Report 2016.”