Give treasury a bigger stake in merger integration: treasury departments are often brought in at the end of the merger process for tactical reasons. But early participation by treasury carries a number of important benefits, as does elevating its role in the overall merger practice.

• Author: Baldoni, Robert J.

Increased emphasis is appropriately being placed on the importance of treasury as a true "business partner" and "value adder" in a company. Treasury regularly has valuable input into the issues that impact a company's earnings and cash flow. Treasury's involvement is now considered indispensable in maintaining or improving a company's competitive position and market share, profitability, shareholder value, market liquidity and transfer pricing, among others.

The value these treasury services can bring to a company has elevated the function to the status of true equal with other core headquarter functions. However, this newfound prominence as a valued, decision support-team member has been slow to penetrate merger and acquisition activities.

This isn't to say that treasuries haven't been involved in merger integration, but their participation too often begins near the close of the transaction and is chiefly operational or tactical. Advisors are often called into situations only days before the final close of the merger or acquisition, when companies are still struggling to resolve questions such as: where is the cash, whose names should the bank accounts be in and at what institutions, have customers been notified of new payment instructions and what is the state of bank and treasury systems?

The nature and timing of these important questions sheds light on two very important issues: First, many treasuries are not involved early enough in the transaction; and second, while these issues are important, there are other issues of a far more strategic nature that can contribute greatly to the success of the M & A event that are not being focused on.

The intention here is not to analyze the political or cultural barriers in companies that have created this situation, or to determine if treasuries have been as aggressive as they should have been in inserting themselves into the process. A more productive approach is to focus on how to best integrate treasury into future merger, acquisition or spin-out activities to guarantee maximum efficiency and value. Once this value is better understood throughout the company, as well as by treasurers themselves, early inclusion of treasury into all these processes will be an obvious and routine part of the process.

Developing and implementing a strategic and value-oriented treasury plan into the overall merger integration process can be a complex process that needs to be customized company-by-company.

The...