Most companies contemplating both an acquisition and the appointment of a new pan-European bank would choose to wait until the acquisition was done and dusted before embarking upon the banking project. Not so for Eastman Chemical Company. In 2012, with the planned $4.7bn acquisition of Solutia only months away, the company’s treasury team made the bold decision to replace the existing banking structure before completing the deal.
While this is an unusual course of action, there was a good reason for tackling the two projects in this order. “If you want to go into your merger in the best possible position, it makes sense to make the move from your old legacy banks to a single strategic bank provider first,” explains James Pollock, senior sales officer at Bank of America Merrill Lynch (BofAML). “It’s much cleaner and easier to do it beforehand — otherwise you will have a massive mopping up exercise to do afterwards.”
CHOOSING THE RIGHT BANKING TEAM
Having decided to make the change, the company’s treasury team now needed to get the new structure in place quickly. The RFP process began early in 2012, focusing on the top banks in the region, but this wasn’t a simple brief. Eastman needed to appoint a bank which could provide 47 bank accounts across Europe, as well as put in place a notional pooling structure and an in-house bank for the company.
Eastman wanted a single system that could provide visibility over their European cash balances and transactions, then consolidate that data onto a single platform. All of this needed to interface directly into the company’s Enterprise Resource Planning (ERP) system, so it was essential to find a bank that would help and support them throughout the implementation.
Finally, it was important to have a single point of contact, with client services run by a centralized team based in the UK. BofAML’s compelling pitch, majoring on its sophisticated CashPro® platform, won the day. But now its relationship team in South London had just three months to implement the new structure, which included two single currency notional pools denominated in euro and sterling, as well as several sweeping and cash concentration structures. The bank was also asked todeploy an interface that would sit between BofAML and Eastman for reporting and payments.
TIMELY, EFFICIENT INTEGRATION
With that hard deadline looming, the BofAML team had to work closely with Eastman’s treasury to guide the company through the technical implementation, providing advice on file formatting to support the interface with the company’s ERP system. Regular touch point calls took place up to twice weekly as the bank supported the company in fulfilling the necessary account opening and documentation requirements.
In what may have been a record time, the new structure was fully in place when the Solutia acquisition took place, meaning that the company was well placed to integrate the two businesses as smoothly as possible.
Deciding to adopt a new cash management solution ahead of the acquisition may have been ambitious, but this brave approach proved to be a resounding success — and Eastman was delighted with the outcome.
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- Eastman moved to a single bank provider before completing a key acquisition
- They wanted to consolidate data onto one platform, and chose BofAML for its sophisticated CashPro® solution
- A new banking structure was in place within three months, enabling swift and efficient post-deal integration