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The Importance of a Treasury Acquisition Strategy

6 steps to developing a framework for folding acquisitions into the corporate treasury function.

By Christine Tolleson | January 17, 2019 at 09:30 AM

Companies announcing bold transactions provide headlines for the business media, but the real—and often more decisive—drama in mergers and acquisitions (M&A) happens outside of public view, during the process of integrating areas such as treasury management.

A 2018 Deloitte study found that nearly 30 percent of businesses are aggressively seeking acquisitions to extend or diversify their product line, expand their customer base, and/or capture new technology. As financing costs remain relatively low despite recent interest rate hikes, acquisitions are currently a preferred driver of growth for many companies. This deal-making is keeping treasury managers busy identifying, gauging, and minimizing the operational and organizational risks inherent in such transactions.

When one company acquires another, it will likely inherit disparate treasury systems and processes, which will present significant challenges for treasury and financial management staff. Problems can mount quickly as a newly merged team works to integrate all the various areas of treasury operations. To complicate the situation, corporate management often continues the acquisition spree, adding other organizations to the company’s portfolio before the previously acquired firm is fully assimilated.

This makes it challenging for the treasury team to capitalize on post-deal synergies that have the potential to improve the function’s operations. Such challenges might include addressing how corporate changes affect debt covenants and liquidity requirements, eliminating duplicative activities in collections and payables workflows, standardizing technology systems, and rationalizing a plethora of bank accounts.

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