Solvay and Syensqo Celebrate a Textbook Spin-off
When Solvay announced it was splitting off its specialty chemicals business into the new firm Syensqo, its treasury hatched an ambitious plan to duplicate the function and have two independent treasury frameworks operating at full steam under one roof well before the go-live date.
Solvay is a Belgian multinational chemical company headquartered in Brussels. The firm was founded by brothers Ernest and Alfred Solvay in 1863, and the most recent chapter in Solvay’s history saw the company split, with the new firm Syensqo spinning off from the parent. The plan was for the essential chemical businesses to remain under the Solvay banner while specialty businesses such as the materials, consumer, and resources segments would be taken on by the spin-off business.
François Soenen, Senior Manager - Corporate Banking, BNP Paribas Fortis, notes: “There is a trend for increasingly large carve-outs, as was the case with the Solvay-Syensqo demerger. They split the company and carved out around 60% of the revenues.”
Once the spin-off was announced, the challenge for the Solvay treasury department was to progressively create the emerging team at Syensqo and to continue working together to ensure both functions were fit for purpose on the day of the new business launch.
Sélim Ul Hasan, Head of International Treasury, Syensqo, who was at Solvay before the spin-off, recalls: “Right up until the spin-off, it was one treasury team, working closely together until the launch date.
This approach was actually slightly different to what was happening in the rest of the business, where the intention was for most functions to operate independently earlier than the actual spin-off date. Treasury and some finance functions were an exception, working as one team to ensure business continuity and to meet all requirements for Solvay and Syensqo for the demerger.
Grégory Roussis, Head of International Treasury, Solvay, agrees: “We in treasury were all focused on one common objective: to achieve the spin-off and ensure business continuity for both future champions. This was critical to be ready before the new business started operating to honour all our commitments such as paying salaries and vendors, while ensuring efficient cash collection.”
Don’t reinvent the wheel
The first crucial decision, which was quickly reached, was that the project would copy and paste the Solvay treasury framework for Syensqo rather than attempt to re-engineer or redesign it.
Ul Hasan outlines: “We were happy with what we had and concluded that the best course of action was replicating that. This option lowered the risk. It was not the right time to try new things. Rather, we were in a position to guarantee that the benefits of the way treasury was working at Solvay would still be there for Syensqo.”
The fact that the spin-off created two companies with comparable treasury needs also meant it made sense for Syensqo to replicate Solvay’s treasury framework. This also required replicating products and services from the bank side.
Delphine Abesdid, Head of Solution Design & Implementation, M&A Deals, BNP Paribas, elaborates: “We set up the same connectivity with Syensqo that we had with Solvay, the same liquidity, and while we opened new accounts for them, they use the same bank connection.”
The foundation for the new function was the treasury framework, based on an IHB that had long been in place at Solvay. The framework included POBO and COBO processes, along with internal factoring mechanisms and cash pooling structures, both regionally and up to the parent company level.
Roussis reveals: “During the project, I was mainly involved in the duplication of the IHB. With my colleagues from treasury, we tried to anticipate all that was possible, deployed the treasury landscape and performed the data migration linked to the specialty business five months before the spin-off. Under the umbrella of one group, we were already effectively operating as two independent companies well before the deadline.”
Having this technical go-live date was a vital factor in ensuring the project’s success. Preparing the framework and all the necessary bank connectivity in advance made it possible to minimise the workload for the new company’s first day.
Abesdid enthuses: “Even though we were still in the Solvay environment, we built a separate framework with bank connections, TMS connections, and liquidity dedicated to Syensqo. We started to make payments from this technical framework to ensure that when it came to day one, we just had to rename some accounts and contracts to make the framework fully independent.”
With the goal of the treasury project established early on, the teams were in a good position to know what had to be in place with the banking partners for Solvay and Syensqo from a legal regulatory standpoint. But even the best preparation could not prevent the familiar treasury pain point of time-consuming KYC from cropping up.
Ul Hasan recalls: “We ensured we collaborated early with our banks, explaining the project and sharing relevant details as soon as we could.”
Indeed, even with the dedicated preparation time, Syensqo still had to undergo some KYC recertification after the separation date. And it’s not just about the KYC. The cash pooling structure for the spin-off required both duplicate and new bank accounts for Syensqo and Solvay activities to be created, while the entire cash flow structure had to be built.
“The cash flow structure was a significant part of our preparation work,” comments Ul Hasan. “We built this in close collaboration with our banking partners, particularly with our cash management banks.”
The cash pool structure for the spin-off is essentially the same as that of Solvay, apart from some minor differences, such as Syensqo’s geographic footprint not precisely matching Solvay’s. Overall, it is based on the same logic and structure. The preparation also required the customers and suppliers of the Syensqo element of the business to be alerted to the change, as the new bank account details required changes to be made by them. This communication was triggered in advance of the technical spin-off.
“Customers have their own processes to validate any new external banking details, so we tried to let them know as early as possible,” explains Ul Hasan. “We were in close communication with our credit management cash collection team and the different business units. Everyone needed to be aligned and ready to answer customer questions to authenticate that the new details were legitimate.”
Setting up Syensqo’s treasury technology was in itself a major task. Still, in keeping with the theme of simplifying where possible, the spin-off would continue operating on the same system that Solvay’s treasury used.
“We manage our IHB in an SAP system,” reveals Ul Hasan. “We created a new financial company in that system, replicated all the programs and the set-up, and adapted this to the new context. But we didn’t have to go through a complete redesign, which made life a bit easier.”
Outside of the ERP, certain satellite systems, such as the TMS, also had to be duplicated, with technology integration a crucial priority.
“We had to ensure that we had the right connectivity channels in place and could clearly separate all the different transactions,” Ul Hasan notes. “Swift is an example of that.”
Partners for change
Solvay’s existing robust treasury team was vital in anticipating potential issues in the spin-off project. If a bottleneck or a peak in the workload was identified, treasury could immediately explain that to the project management office and secure additional resources to manage the extra tasks.
“One of the critical points was to maintain business continuity at all times,” emphasises Ul Hasan. “We had the support of PwC for project management aspects, and the rest was carried in-house by our treasury and IT teams. The experience of the people carefully planning ahead was a key success factor.”
The close collaboration with Solvay’s banking partners was another vital part of the project’s success, particularly BNP Paribas’ role as Solvay’s primary bank partner in Europe.
Solvay’s Roussis highlights: “The support of our banks was one of the main reasons why we were able to achieve the goals of our journey. It was not only a challenge for Solvay, but also for BNP Paribas and our other banking partners in different regions. Without the banks, we couldn’t have got to where we are today.”
That calibre of trusted relationship can only be cultivated over time, with open lines of communication between the corporate and banks to ensure that everyone knows the objectives of the project plan.
BNP Paribas’ Abesdid enthuses: “We developed an excellent team spirit with Solvay and Syensqo. Whenever they had crucial information that impacted the project, they shared it with us, which was extremely beneficial. Also, because we knew the clients well before the spin-off, we already knew their set-up in great detail.”
Internal communication between the treasury team and the rest of the business was also essential, enabling everyone to be kept abreast of deadlines.
Ul Hasan chuckles as he recalls how he quickly discovered that treasury could be perceived as “the bad guy” in a spin-off project. “We came to the project management office with constraints and had to explain to them that we needed time to time to carry out certain aspects of the change properly,” he says. “If we couldn’t perform these things correctly, we would have a business continuity issue, which would be a disaster.”
Fortunately, by educating the project team and other stakeholders who may not have been fully aware of the constraints that treasury faced, the Solvay and Syensqo teams were able to navigate any potential friction and bring the project in on time.
One vision, two destinations
Solvay and Syensqo began trading as separate entities on 11 December, 2023. Reflecting on the journey, Ul Hasan says that the communication and education work with the rest of the organisation and external advisors on the project management was critical.
“Ensuring that communication on all levels was crystal clear was vital, as partners in the business needed to understand the constraints that treasury is under,” he stresses. “Treasurers operate in heavily regulated worlds, so there are certain incompressible timelines.”
Roussis agrees that looking beyond treasury and engaging with all stakeholders to tap into their knowledge and motivation is essential to achieving a successful spin-off.
“You need that in treasury, but also from other essential stakeholders such as IT,” he points out. “Without a great IT team, we could not have achieved what we did.”
Both treasurers also emphasise how helpful it was to work to a technical spin-off date for the treasury that was well in advance of the company’s actual separation.
Ul Hasan elaborates: “I would recommend anyone planning a spin-off to implement a date for a technical split in treasury if the project timeline allows it, rather than just jumping off the cliff on the spin-off date. It enables treasury to solve issues and manage potential obstacles while everyone is still within the same group.”
Roussis concurs that anticipation is critical in such a project. As this project proved, treasury can have everything set up before the actual separation date so that, inside the group, the structure is ready to operate independently even though both parties are still working together. “The earlier you are ready, the quicker you can identify any potential issues and sort them out before the spin-off,” he advises.
With Syensqo now spun off, the Solvay treasury now has a chance to reflect on how to maximise the opportunities created by this significant change to the business.
“We are going through a thorough exercise to reassess our processes and functions to look at whether they are fit for the new Solvay or if we need to change,” Roussis admits. “We have started the new Solvay with a book full of history and are now writing our future by assessing what is necessary for this new company, rigorously challenging whether a process is essential to support the current business, nice to have, or simply not needed anymore. Our day-to-day is to define what great looks like for Solvay.”
