Published: September 01, 2010
Panini has experienced very rapid expansion in recent years, in terms of both its geographic reach and the extension to its product range. Over this period, cash management has been a lower priority compared with addressing the immediate needs of a growing company. As the company matured, Panini’s senior management recognised that there needed to be a renewed focus on optimising cash and mitigating financial risks to position the company for the next stage in its development. Panini has a seasonal cash flow cycle, with large cash surpluses at certain times of year that needed to be repatriated to the head office in Italy and managed centrally, to net surpluses and deficits across the group.
With cash concentration a key requirement for Panini, the company was seeking a banking partner with a strong presence in each of its key markets, or a partner bank with a common commitment to product and service delivery within an integrated framework. Panini had an existing relationship with UniCredit in Italy, and made the decision to extend this relationship for cash pooling across the group, whilst maintaining its existing banking partners in each country, recognising that a multi-bank environment helped to reduce its credit and concentration risk.
UniCredit worked with Panini to implement cash pools across the business, with one cash pool for each major currency. In Europe, zero-balancing structures were put in place, while in the United States, target-balancing was introduced, recognising that there were two sets of very distinct needs in the business.
The first countries to be implemented were Spain and the United States. Even though UniCredit does not have a presence in Spain, the bank worked closely with its partner bank, Santander, to implement a cross-border zero-balancing arrangement. In this way, Santander acts as the local bank, providing most of Panini’s payment activities, and transfers surplus funds on a daily basis to UniCredit in Italy for same-day value. In the United States, Panini recently won various US sports licences for trading cards, expanding its activities there. The use of large volumes of cheques and the structure of the banking sector in the US, with no single bank able to provide comprehensive services across the whole country, force Panini to make use of local banks. UniCredit New York, the local point of presence, is connected to the company’s main USD account in Italy on a target-balance basis. The role of country cash concentrator seems to fit precisely to UniCredit in this situation. Proceeds from sales are indeed regularly deposited in UniCredit New York by local banks, and then automatically transferred each day to Italy.
With these two countries now connected to the relevant cash pools, the next step will be to implement in Poland, Germany and the Netherlands, although the order in which these countries will be addressed has not yet been determined. Implementing cash pooling in Poland can be challenging due to regulatory constraints; however, Bank Pekao, the local UniCredit bank, having successfully created several zero-balance structures, can provide the necessary expertise and consulting to complete the project. Due to Panini Group structure, it will be necessary to pool cash initially into Germany, and then to Italy. This two-tier approach will be supported by a synchronised target balance scheme, so that same-day value can be achieved on funds received in Italy.[[[PAGE]]]
“UniCredit is proud to support Panini throughout this project and beyond, building on an already strong relationship between the two organisations. Its success has been enhanced by regular communication and expert assistance at all stages of the project.
When embarking on a multinational project of this sort, it is often not language barriers that present the greatest challenges. Instead, addressing cultural differences, the diversity of domestic payment schemes and the need to communicate closely with subsidiaries are the key factors in ensuring the success of any cross-border project. Having a strong local presence, either directly or indirectly through an effective partner bank, makes a significant difference to the quality of the project that is delivered to the customer.”
Giacomo Giordano
International Cash Management Sales, Italy, UniCredit
The cash pool has now been operational in Spain for about a year. With similar flows into and out of the country, but with different timings, treasury management can now be optimised, interest compensated and large surpluses or deficits avoided. In the United States, the target-balance cash pool has proved the ideal solution for repatriating surplus cash whilst retaining an independent subsidiary with autonomy over daily activities.
Panini has a web-based treasury management system in place that is currently accessed from Italy and France, although this could be extended to any location. This system automates all the intercompany transactions resulting from zero-balancing and target-balancing flows.
Based on its experiences so far, Panini has found that when implementing a cash concentration project on an international, multi-currency basis, it is vital to work with a partner bank with a strong direct presence, or partner bank relationship in each country of operation. Furthermore, it is not sufficient simply to adopt the standard or default solution available from a bank; rather, a customised solution may be required to satisfy the company’s specific needs. In the case of UniCredit, this was particularly relevant for the United States where the local subsidiary had different needs from those in Europe.
Panini and UniCredit will continue to extend the cash pooling arrangement across Panini’s countries of operation. Furthermore, the solution can evolve according to the company’s anticipated growth path, enabling treasury to continue supporting the current and future needs of the business.
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