Is treasury ready for an M&A deluge? As the volume of dealmaking increases, treasury departments need to ensure that their strategic cash and risk management frameworks are not overwhelmed.

• Author: Torgler, Jason
• Position: Risk Management

Corporations are still holding huge amounts of cash. According to Standard & Poor's, companies had been hoarding cash for 13 consecutive quarters--amassing some $1.13 trillion on their balance sheets--before the total ticked down slightly in the first quarter of 2012. Today, executives are coming under increasing pressure from shareholders to put this cash to work and boost growth.

Certainly the mergers and acquisitions market is one area receiving enormous attention--if not enormous activity--from corporate leaders. Dealmaking remains moribund, although there are signs it may be turning around.

In the first quarter of 2012, M&A activity fell to its lowest quarterly level in more than seven years, according to Thomson Reuters. But interest is ticking up. WellPoint Inc., the second-biggest U.S. health insurer, recently bought a rival for $4.9 billion in cash. Also, Campbell Soup Co. recently announced a $1.55 billion cash acquisition--the company's largest-ever acquisition.

As companies look to M&A, treasurers should be aware of the challenges and risks their operations will have to cope with in the face of this prospective growth. As companies examine acquisition targets and get ready to make deals, they must realize that the speed and efficiency of any merger may hinge on the quality and robustness of their framework for evaluating and merging global cash, liquidity and risk management processes and supporting technology.

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Preparing Cash and Liquidity For Growth

When it comes to vital cash and liquidity concerns, treasurers should first prepare their operations for growth by building a framework for cash and liquidity processes. This framework will give organizations the visibility they need to efficiently accommodate growth in their business.

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The first step should be to centralize bank account administration. By consolidating the tracking of various bank accounts and account activity--such as openings, closings and signer adjustments--treasurers will better understand the cash management structure and provide opportunities for optimization.

Treasurers should also aim to secure a comprehensive world-wide view of their cash position, which is vital to building a better cash and liquidity management framework. In fact, leading acquisitive companies utilize technology to enable them to automate and schedule data collection on all the organization's bank statements across all banking partners.

Treasurers should then consolidate this information in a flexible worksheet. These worksheets must enable treasury staff to filter and parse...