Strategic Treasury

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CEPSA: Network, Trust, Integration, Client Service CEPSA was facing a situation that is becoming increasingly commonplace for oil and gas companies. M&A activity results in an acquisition that must be integrated as efficiently as possible, as quickly as possible.

CEPSA: Network, Trust, Integration, Client Service

CEPSA: Network, Trust, Integration, Client Service

by Fernando González Romero, Head of Treasury, CEPSA and Blanca Goñi Gonzalez, Head of Global Liquidity and Cash Management Madrid, HSBC

When a corporation makes an acquisition, one of the most urgent tasks for corporate treasury is obtaining visibility and control of the acquired company’s bank balances before incorporating those balances into existing corporate liquidity management structures. So when Spanish oil major CEPSA acquired Coastal Energy, Fernando González Romero, Head of Treasury at CEPSA, immediately called HSBC.

Integrating a new acquisition is demanding enough for any corporate treasurer, but when the acquired entity largely operates in a region of the world unfamiliar to the acquirer, the challenges are of an altogether higher order of magnitude. This was precisely the situation confronting Fernando González Romero, Head of Treasury of CEPSA, in March 2014. CEPSA was acquiring Coastal Energy, which had its principal assets in Asia, where CEPSA had little previous presence. The immediate need was to gain visibility and control of Coastal bank accounts held in Thailand, Malaysia, Singapore, Canada, US, UK, Mauritius, the Cayman Islands and Bermuda, while the longer-term need was to assimilate Coastal’s balances into CESPA’s liquidity management scheme.

While this task was exacting, it is rapidly becoming commonplace in the oil and gas industry. A recent straw poll of 223 oil and gas treasurers conducted by HSBC revealed that 65% regarded dealing with M&A activity as their top priority. The remedy is to partner with a global bank that has the physical network and niche expertise to handle the most complex global M&A integrations efficiently.

Visibility and control

As mentioned, the first priority for CEPSA’s treasury in Madrid was to obtain visibility and control of all Coastal’s HSBC bank accounts worldwide in a very short time frame. In order to do this, new transaction authorisers had to be appointed for these accounts, which would involve such tasks as providing proof of ID plus complying with other bank Know Your Customer (KYC) and Anti-Money Laundering (AML) measures. By early 2014 CEPSA had already made progress with this process itself on a country by country basis, but the demands of communicating with multiple third parties in several languages around the globe in various different time zones, plus differing documentation and legal requirements, were causing delays. In order to expedite the transition, the task needed to be tackled differently. 

“It seemed clear that we needed to take a different approach and ask HSBC to manage the process on our behalf,” says Fernando González Romero. “Ideally, they would handle all the international communications with their offices internally, while providing us with a single point of contact and coordination here in Madrid. They would express our needs to their colleagues elsewhere, filter any requests to us for information to minimise our workload and keep us updated on progress.”

The account transition represented a considerable challenge, as it involved more than 20 bank accounts, in different currencies and in seven different countries belonging to various Coastal entities. Furthermore, several key Coastal personnel were due to be leaving the company post-acquisition. Therefore, the whole transition process had to be completed with new transaction authorisers in place within three weeks if disruption to the Coastal businesses was to be avoided.

CEPSA’s Treasury HO was assigned the task of managing the account transition on Friday March 28 2014. Fernando González Romero immediately called HSBC’s Madrid office requesting a meeting at the bank that afternoon. At the meeting, Fernando and two of his colleagues outlined the challenge to Blanca Goñi Gonzalez, HSBC’s Head of Global Liquidity and Cash Management in Madrid, and her team. Fernando González Romero says: 

“Going into the meeting I had some concerns as to whether it could be done. We had a three week deadline to turn around an increasingly demanding task. Additionally, the team dealing with it until then, regardless of their efforts, felt the degree of achievement of it's goals was not satisfactory. During the meeting, it became clear that the HSBC team understood the challenge exactly, as well as how to deal with it. By the end of the meeting I knew the target would be hit on time, the building blocks of a plan had been drawn up by HSBC during the conversation and a fully committed team had taken a tight grip on the challenge.”

The HSBC team started work immediately over the weekend. A project plan was produced identifying which documentation was needed in each country and daily conference calls were organised to update CEPSA on progress. An important part of the project was co-ordinating requirements globally to avoid asking CEPSA for unnecessary information.

“For instance, a particular jurisdiction might require a certain form of ID for a new authoriser, but another jurisdiction might already have that ID on file,” says Blanca Goñi Gonzalez. “Rather than unnecessarily request the ID again from CEPSA we could simply supply it internally. As quite a few of the authorisers were already known to us here in Madrid, we were able to speed things up significantly in this way.”

Despite the very tight deadline, the project was completed within the required three weeks and Coastal’s day to day operations were not affected. CEPSA was already using HSBCnet, so the Coastal bank balance information was immediately available to CEPSA in Madrid via that.

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