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Head2Head: Maximising the Value of ‘MADS’ Transactions

by Bruce Meuli, Global Business Solutions Executive, and Jonathon Traer-Clark, Head of Strategy, Global Transaction Services at Bank of America Merrill Lynch

In this edition, Bruce and Jonathon discuss M&A, together with divestments and spin-offs. As the volume of M&A activities grows, this will become a more important issue for treasurers on both sides of these transactions.

Jonathon Traer-ClarkJTC When you ask anyone in transaction services about their M&A experience, long days and short nights come to mind for most. Over the past six months at least, you only have to glance at the headlines to know that global deal flow is on the up. But from a treasurer’s perspective, it’s not just mergers and acquisitions that are worth discussing: Divestitures and spin-offs (collectively ‘MADS’) also have major implications for treasurers, so they need to be involved in these transactions.

Bruce MeuliBM At the heart of the MADS debate is how the corporate treasurer can prepare for change, and leverage the opportunity that it presents. To be successful in this, the treasurer needs to be in the driving seat as early as possible. All too often, treasurers get pulled onto the deal team too late, putting them in situations where they have to execute on a number of issues – funding, risk, due diligence to name but a few – at a moment’s notice. For large corporates that evaluate and process multiple targets simultaneously – what I would call ‘serial acquirers’ – putting standard processes in place so the organisation can align activities for one transaction and across transactions is critical. This means looking at all the strategic implications of a deal from a financing, charges, liquidity and assets perspective. It involves engagement with legal, tax and others too.

Jonathon Traer-ClarkJTC That’s the right concept in theory, but it ultimately depends on how institutionalised the corporate finance development cycle is. The typical involvement of the treasurer usually depends on the size and transaction frequency of the business – maturity if you prefer. A dedicated department running integration processes is only necessary if MADS are part of your DNA and a continuous cycle. I’d argue that engaging the treasury department at the right time is a balance of confidentiality (need to know) and financial readiness. It is treasury’s job to help finalise and then integrate transactions, not necessarily to scout for them – that’s up to corporate finance and strategy, except of course, where treasury is also responsible for corporate finance. Naturally, the size of the organisation plays a part and at smaller companies, treasury is likely to be involved earlier. So for me, engaging in MADS discussions at the right time, depending on the organisation and transaction size is what matters.