In 2017, global M&A activity reached $3.71 trillion, down 3.3% from $3.84 trillion in 20161. However, in the first quarter of 2018, there was a 28% year-on-year increase2 in global M&A activity proving it remains an important topic for the strategic treasurer.
The macro environment should remain supportive for global M&A in 2018. Strong economic growth in the U.S. and eurozone coupled with accommodative low interest rates should continue to underpin investors’ focus on growth.
With treasurers increasingly responsible for planning and integration, support along the way is essential. That’s why we offer solutions and insights that help transactions run smoothly, both before and after the deal is closed.
DAY ONE READINESS
With the average "deal announced to closed" cycle amounting to 136 days in 2017, it is important to consider a number of questions as early as possible as you get ready for the M&A journey. BofAML has access to Checklists and Project plans to assist you in this process. Plus the full implications of a deal will need to be examined — including the treasurer’s role, financing, liquidity and more — to maximize the value of a transaction.
Some questions you may want to consider:
- Have appropriate controls been put in place for compliance, audit and risk management?
- Have you established a cash monitoring and funding process to ensure cash visibility and control?
- Do you understand the regulatory, tax, treasury practices and instruments in the new geographies where the NewCo will operate?
- Would you replicate the current set up for a carve out, or would you take advantage of an opportunistic design?
- How will you accommodate the differing investment grade and liquidity needs of the NewCo?
- Do you see opportunities for treasury enhancements for the NewCo?
- Does treasury have full access to resources needed to integrate the acquired company?
- Is M&A part of your core group strategy? What is the role played by your treasury in M&A events?
Merging Two Global Cash Operations
Cerner’s pre-deal race to achieve efficient integration
What happens after a deal is closed is another key area of involvement for treasurers. Some key areas of focus you should consider are:
- Gain immediate visibility and control of company's cash, investments and banking activities
- Identify and mitigate financial risk issues such as currency, interest rate, credit, commodities, etc.
- Identify and control all treasury technology
- Review, revise and integrate policies, procedures and documentation
- Determine the optimal combined treasury organization's future state; options include shared services, centralized, etc.
- Establish efficient data collection methods
- Assess combined treasury's technology needs and perform "gap analysis" to determine additional technology and systems requirements
- Support the redesign of planning processes through more accurate cash flow forecasting methodologies and budget rate selection
- For how long are you intending to track the benefits associated with the M&A transaction?
- Increased scale and complexity provides opportunity to review and redesign processes – move up the "best practice" continuum
- Adopt new structures that will facilitate future M&A
- Support the business side of the integration by acting as the in-house consultant to business units to help evolve their issues that "touch" the treasury spac
Treasury Integration from
the Ground Floor Up
Increasing visibility and control at Mohawk Industries
You should obtain support from your bank through all the stages of the MA&D journey and work with a provider offering broad M&A and transaction services in the territories where you do business.
1 DealLogic Analytics, 2017
2 DealLogic Analytics, 2018