Tight Controls and Sharp Strategies are Key to Enhesa’s Swift Growth

Global intelligence firm Enhesa is expanding rapidly worldwide, supported by a treasury function that demonstrates operational excellence.

Enhesa is a global provider of regulatory and sustainability intelligence, with more than 500 experts assisting some of the largest MNCs and leading brands with the renewables element of their operations.

Laurent Marcelis, CFO, Enhesa, explains: “We support clients in creating more sustainable products and implement accurate sustainability reporting for them. We are in the business of helping other companies get to the next level of their environmentally aware journey.”

As may be expected for a company in this burgeoning sector, Enhesa is a growth business, and Marcelis reveals that the firm has an organic growth rate that exceeds 20% annually. That has a direct impact on treasury management.

“As a growth company, it’s vital to have good cash flow management,” asserts Marcelis. “This helps us reassure everyone within the organisation that we can meet the increasing operational expenses.”

Additionally, by the very nature of its global presence, Enhesa has significant exposure to currency fluctuations. This is reflected in treasury’s attention to detail on risk management.

“We have a focus on FX, but for us, all risk management is crucial,” reflects Marcelis. “We also have some senior debt that is sensitive to interest rate fluctuations, so we have to manage the risk and mitigate the financial impact of risk on the company.”

Enhesa’s treasury department works closely with the FP&A team. This partnership plays a pivotal role in examining the near future and beyond, planning future cash needs, and supporting the overall financial performance of the business.

Covenants are king

With entities across Europe, the UK, the US, Canada, and East Asia, managing cash is the primary focus of the Enhesa treasury in supporting the group’s working capital position. The cash management function was centralised at the group treasury level to ensure it was fit to support the company’s global growth prospects.

With cash management thus optimised, treasury then set about installing a worldwide cash-pooling system to improve liquidity further and enhance working capital.

“Cash is intrinsically linked with risk management,” muses Marcelis. “That means treasury is involved in implementing all internal controls within the group and enhancing them to ensure that everyone is in compliance with our framework across all regions.”

This includes conducting regular audits to reassure treasury and senior management that all participants follow HQ-issued rules. Then, in addition to the internal overview of cash and risk management, treasury also oversees vendor and supplier relationships with external third parties.

“Treasury works on negotiating better terms and conditions to optimise the cash flow centralised within Enhesa,” elaborates Marcelis.

Debt management, the other side of the working capital coin, is also closely monitored in treasury. Two private equity firms own Enhesa’s debt structure.

“We have a leveraged debt, which consists of a senior credit facility combined with an RCF,” outlines Marcelis. “The structure we have for funding with the RCF is quite flexible, which helps us with our cash planning.”

The RCF is linked to the cash flow forecasts, and where possible the treasury will reimburse the debt by cash inflows generated by the company. “That is where it is essential to have good cash flow planning so that we can predict the reimbursement of the RCF,” Marcelis states.

Every senior debt comes with several covenants and treasury is the gatekeeper of these, following up on all financial KPIs. “It is important to reassure the group that we have enough headroom when we talk about the covenants, which are linked to the group’s financing structure,” Marcelis adds.

Maintaining control in the face of adversity

At a high-growth company such as Enhesa, the business will not always expand in an upward straight line that is 100% accurate and predictable. This places specific importance on the company’s cash flow forecasting.

“Treasury is particularly essential as a link to the separate FP&A team as they collaborate to try to predict forecasts as accurately as possible for the coming months, quarters, and year,” Marcelis stresses. “Linked to that, our Treasury Officer then carries out the cash flow forecasting to plan for future needs, as our revenues and costs are not 100% linked to one another.”

All this work is driven by the goal of having the optimal cash position at any given time to ensure there is enough liquidity to meet the company’s operational needs.

“It is essential that treasury can reassure the business that, for a defined future period, we will always be able to meet all the demands for cash,” comments Marcelis. “The debt structure, with the flexibility we have there, and our good cash flow management makes this work.”

Accurate forecasting also supports good risk management practices, although naturally, there are certain events – such as the 2008 global financial crisis or the lockdowns and port closures caused by Covid-19 – that are far from predictable. So, while the most significant predicted change in the financial world throughout 2024 has been about the number and volume of interest rate cuts by the world’s central banks, there might equally be the next black swan event just around the corner.

“We must think about everything, manage and plan for various possibilities, and ensure we have the optimal hedging products in place for interest rate and FX exposures,” Marcelis reveals. “Having control is vital here. Setting up and fine-tuning the control framework so that we manage everything in a structured way is essential within the group’s growth pattern.”

Feeling the pressure, delivering results

In addition to the operational aspects of cash management at Enhesa, the treasury function also delivers a critical strategic advantage by optimising the capital structure.

“The funding strategy of a company with a growth profile like ours is vital in supporting that growth and helping our investments,” enthuses Marcelis. “As a company, we are assigning significant sums to CapEx to develop our platform but also spending heavily on the content hosted there. Treasury comes into play for all the funding to support that.”

Enhesa’s recent acquisitive history has also been actively underpinned by the treasury team, which was vital in establishing the best structure for the transaction. This also extends to the post-transaction period, ensuring a structure to cover all the liquidity demands resulting from the acquisition.

“Treasury plays a role in dealing with any issue that potentially impacts the cash flow, risk, and processes,” underlines Marcelis. “The funding structure and the function’s activity during M&A transactions are two key topics linking treasury to the business strategy.”

Reflecting on the challenges presented by supporting an acquisitive company in its growth, Marcelis notes that the pressure felt by treasurers is acute, but that reflects the overall importance of the treasurer’s job. Details matter when planning an M&A transaction, and a treasurer’s eye for detail is central to a successful outcome.

“For the finance team as a whole, and treasury in particular, an M&A transaction requires comprehensive financial due diligence. It is vital that we understand all aspects of the target’s financial health,” he says. “That takes time and energy, but it’s essential in a deal.”

The work required following the transition from due diligence to integration planning is just as critical but not as lauded. Financing a deal is crucial and not always straightforward. However, having a cash flow plan following the completion of the acquisition is just as important.

Marcelis concludes: “Closing the acquisition is just the start of the journey. Planning the future cash flow of the target, post-integration, is equally critical. Integrating the target business into the group and the control framework is an area where treasury can demonstrate its added value to the business.”