Treasurers Take on a Bigger Role in M&A Deals

This year is shaping up as a promising one for mergers and acquisitions. A recent Merrill Datasite/mergermarket report, “The Future of M&A in the Americas,” says 2013 is off to “frenzied start,” with more than 1,000 deals, worth US$267 billion, announced in the first eight weeks. The 567 transactions announced in the Americas region accounted for roughly $176 billion of that total. Moreover, about two-thirds of the corporate execs and investors responding to the survey expect the volume and value of M&A in the Americas to increase this year.

That’s good news for corporate treasurers, many of whom are taking on larger roles when their firms engage in M&A. Historically seen more as a numbers-crunching, process-focused area within corporate America, many treasury departments have expanded into more strategic activities, including M&A, since the financial crisis, says Bob Stark, vice president of strategy withKyriba.

As credit tightened, it wasn’t just CFOs asking about their companies’ access to financing and exposures; it was the CEOs and boards as well. “If treasurers were able to easily, confidently answer these questions, it was an opportunity to contribute to other strategic areas, like M&A,” Stark says.

Another recent survey, this one by J.P. Morgan, found that 44 percent of treasurers are being brought into merger and acquisition transactions prior to the public announcement of the deal. That’s a switch from historical practice, in which treasury groups typically were brought in after the announcement, but prior to the deal closing.

That’s not to say that treasurers aren’t encountering any obstacles as they expand their roles. For starters, a few execs continue to view treasurers mainly as number-crunchers and the folks who move money around, Stark says. Treasurers still may have some proving to do.

Another challenge is more tactical: In order to provide strategic insight and support, treasurers need to be able to spend time analyzing and evaluating their organizations’ working capital status, cash forecasts and the like. In order to not be perceived as number-crunchers, treasurers can’t, of course, be spending all their time crunching numbers. Making the shift typically requires some level of automation.

Once treasurers are able to reduce the amount of time they spend gathering and assembling data, and more time analyzing it, they often can provide valuable insight into potential M&A deals. For instance, treasurers should have a good handle on the company’s cash position and ability to access financing. That knowledge can be critical when determining how to structure a deal. They’ll know what cash the company has, what (if any) additional amounts are needed, and how to get them, Stark says.

In addition, because treasurers understand how the company generates cash, they can estimate how an acquisition will contribute to cash flow. That can help the company more accurately value a proposed target, Stark says. “Ensuring the valuation of the acquisition boosts the likelihood of success.”

Treasurers also are often called on to identify potential post-deal efficiencies in processes, banking services and account structures, among other areas, in order to cut costs over the long term.

After a transaction closes, treasurers’ work isn’t over. Instead, they’re busy making sure that all systems of the combined entity are up and running – immediately. “There is no breathing room. You need to ensure that all of treasury happens the next day,” Stark say.