Financial Accounting
Advisory Services
Treasury services for corporate
transactions
October 2015
Agenda
1
Treasury services for corporate transactions
3
2
The big picture
4
3
The M&A journey — where are you?
6
4
Treasury challenges in M&A transactions
7
5
How we can help at each phase of the transaction
9
6
Why EY?
11
7
About EY
12
8
Contacts
14
Page 2
Financial Accounting Advisory Services | Treasury services for corporate transactions
Treasury services for
corporate transactions
Page 3
Financial Accounting Advisory Services | Treasury services for corporate transactions
The big picture
M&A ranks top on boardroom agendas,
with 56%1 of senior executives expecting
to pursue acquisitions in the next 12
months.
► 30% of M&A transactions over the next
year are outside the domestic market and
54%1 in countries close to home.
► The treasurer’s role is expanding to
respond to the significant level of
unplanned but integral involvement
required of them.
► Treasury involvement in M&A is critical
to obtaining synergistic value and reducing
risk of failure, due to the complexity of
cross-border transactions.
►
56%
of companies expect to
pursue acquisitions in
the next 12 months1
Source:
1 Global Capital Confidence Barometer, EY, 2015
2. Rising Expectations for M&A in 2014, J.P.Morgan, 2014
Page 4
Financial Accounting Advisory Services | Treasury services for corporate transactions
M&A integration
failure rates are
estimated at
66%–75%2
What are the main challenges to your M&A
strategy?
An EY survey of senior executives has identified internal resources and capabilities to execute
and integrate a deal as key challenges over the next 12 months:
Deal execution and integration capabilities
34%
Funding availability
34%
Insufficient opportunities or suitable targets
33%
Buyer competition
31%
Lack of internal resources or managerial focus
19%
Adverse political environment
17%
Regulatory environment
11%
Adverse economic environment
8%
Valuation gap between buyers and sellers
4%
Uncertain tax environment
4%
April 2015
► Internal
M&A and integration resources are the main challenges to companies’ M&Astrategy.
► Funding,
quality and number of opportunities, and competition for assets, are still concerns.
Source: Global Capital Confidence Barometer, EY, 2015
Page 5
Financial Accounting Advisory Services | Treasury services for corporate transactions
The M&A journey: where are you?
Are you where you want to be on
your M&A journey?
In a successful M&A transaction,
early treasury involvement across
main transaction phases is crucial
to gain synergistic value and reduce
risk of failure.
Like any journey, a transaction
requires a clear road map. EY has
identified treasury’s key role in an
M&A life cycle.
Pre-deal
► Perform
treasury
due diligence
review, identify
financial risks
target’s
capital structure
► Identify
► Analyze
target’s
treasury
organization
Contracting
► Define
how the
transaction will
complete, liaise with
tax and legal
functions
► Negotiate
proposed
structure with
counterparty
Post-deal
► Create
robust day
one integration plan
► Close
the
transaction
► Put
processes in
place to capture and
measure synergies
► Analyze
and arrange
local financing
requirements
Each phase requires appropriate
planning and understanding of the
existing resources and their
transaction experience.
Page 6
Financial Accounting Advisory Services | Treasury services for corporate transactions
Treasury challenges in M&A transactions
Resourcing challenge
It is difficult to identify dedicated resources for ad hocprocesses.
A reliance on the existing team increases operational risk by distracting them from day-to-dayoperations.
A common challenge for treasury teams is to be involved early enough in the deal process to enable
planning and time to identify resources.The lack of early resourcing could mean that treasury does not
have the time, or is not in place, to participate properly in the due diligencephase.
Experience challenge
The treasury team’s experience in executing a transaction is important.
Cross-border transactions are complex and require an experienced team equipped to respond to risks
such as:
►
Foreign exchange (FX) volatility arising from non-domestictargets
►
Trapped cash
►
Local funding
►
Incorrect treasury accounting andreporting
Bringing the treasury perspective when collaborating with other functions, such as tax and legal, requires
experience and is key to successful transaction close and post-dealimplementation.
Page 7
Financial Accounting Advisory Services | Treasury services for corporate transactions
Key questions to ask when approaching a
transaction
Treasury operations
►
►
►
What is treasury‘s role in the transaction?
Is your deal structure efficient in minimizing
financial risks?
Capital markets and funding
►
How are you managing changes to target‘s
capital structure?
►
Have you considered the allocation of
deal cash?
►
Do you have an investment strategy for
excess funds?
How will the deal be funded and paid locally?
Cash management
►
Have you identified banking requirements?
►
How will cash be reported in new entities?
►
Have you made preparation for deal-close
cash payments?
Accounting and reporting
►
Have you considered the accounting impact on
the following:
► Local
and group financial statements?
► Distributable
► Existing
Page 8
reserves?
hedge?
Financial Accounting Advisory Services | Treasury services for corporate transactions
How we can help at each phase of the
transaction
Pre-deal
Contracting
►
Treasury due diligence
►
Identifying settlement risk
►
Determining treasury
workstreams and milestones
►
Liaising with other teams to
gather key information
►
Hedging strategies for deal
funding and headline price
►
Impact on group liquidity
from local funding
►
Managing communications
and presenting to key
stakeholders
►
Assessment of FX risk
from transaction and
group changes
Assessment of the sale and
purchase agreement for
treasury implications
►
►
Page 9
Development of standardized
deal settlement structures to
minimise P&L volatility
Post-deal
►
Helping ensure efficient
implementation of cash
management
►
Advise on compliance with
IFRS for accounting and
reporting
►
Analysis of, and advise on,
acquired financing contracts:
► Change
of control
► Contingent
liabilities
► Embedded
derivatives
Financial Accounting Advisory Services | Treasury services for corporate transactions
What benefits can you expect?
Efficient management of
deal completion
►
Minimization of P&L volatility through careful deal planning
►
Structuring settlement payments to maximize successful deal closing
Pragmatic and bespoke
treasury approach
►
Help with achieving reduction in physical cash transactions to settle the deal
►
Help with selecting funding options that minimize trapped cash and inter-company
balance cleanup
►
Focus on efficiencies and reduction in administrative work
Wider multidisciplinary
team that can understand
the big picture
►
A broad team providing technical accounting input, treasury systems advice for
cash management solutions, or help to identify efficient reporting tools in the
post-deal phase
In summary
►
Dedicated team members, with extensive knowledge of treasury deal risk
management, who quickly understand your transaction, work with your team and
relieve pressure
Page 10
Financial Accounting Advisory Services | Treasury services for corporate transactions
Why EY?
EY has helped treasuries in multinational groups complete transactions and manage financialrisk
efficiently.
We can help you:
►
►
Achieve a deal settlement structure that is FX efficient:
For example, a listed multinational group completed a US$6b joint venture allowing for asset and
share carve-outs involving 120 entities and 60 worldwide locations with no FX exposure left
outstanding after the deal close.
Reduce deal settlement risk and liquidity risk by developing settlement structures focused on
global payments:
For example, a listed multinational group completed a US$10b acquisition involving asset and share
purchases in 55 countries, including entities in Latin America and Southeast and CentralAsia, with a
maximum one-week local payment delays. The settlement models achieved a 76% reduction in
local payment and funding needs (of the 55 countries, only 13 required local transactions with
physical cash).
Page 11
Financial Accounting Advisory Services | Treasury services for corporate transactions
About EY
Page 12
Financial Accounting Advisory Services | Treasury services for corporate transactions
Your regional EY network
Africa
Angola, Botswana, Cameroon, Chad, Congo,
Democratic Republic of Congo, Equatorial
Guinea, Ethiopia, Gabon, Ghana, Guinea, Ivory
Coast, Kenya, Madagascar, Malawi, Mauritius,
Mozambique, Namibia, Nigeria, Rwanda,
Senegal, Seychelles, South Africa, South Sudan,
Tanzania, Uganda, Zambia, Zimbabwe
Belgium and Netherlands
Germany, Switzerland and Austria
Commonwealth of Independent States
Armenia, Azerbaijan, Belarus, Georgia,
Kazakhstan, Kyrgyzstan, Russia, Ukraine,
Uzbekistan
Central and Southeast Europe
Albania, Bosnia and Herzegovina, Bulgaria,
Croatia, Cyprus, Czech Republic, Estonia,
Greece, Hungary, Kosovo, Latvia, Lithuania,
FYR of Macedonia, Malta, Moldova,
Montenegro, Poland, Romania, Serbia,
Slovakia, Slovenia, Turkey
France, Maghreb and Luxembourg
Algeria, France, Luxembourg, Monaco,
Morocco, Tunisia
Financial Services Organizations
Belgium, Channel Islands, France, Germany,
Ireland, Italy, Luxembourg, the Netherlands,
Portugal, Spain, Switzerland, the UK
Page 13
India
Bangladesh, India
Nordics
Denmark, Finland, Norway, Iceland, Sweden
Mediterranean
Italy, Portugal, Spain
United Kingdom and Ireland
The UK, the Isle of Man, the Republic of Ireland
Middle East and North Africa
Afghanistan, Bahrain, Egypt, Iraq, Jordan,
Kuwait, Lebanon, Libya, Oman, Pakistan,
Palestinian Authority, Qatar, Saudi Arabia,
Syria, Tunisia, United Arab Emirates
Financial Accounting Advisory Services | Treasury services for corporate transactions
Financial Accounting Advisory
Services
Contacts
Karin Sancho
EMEIA Treasury Leader
Craig Kennedy
Corporate Treasury
karin.sancho@se.ey.com
ckennedy1@uk.ey.com
+45 852 059 767
+44 207 951 9026
Leo Gribben
TransactionAdvisory
Lynne Counsell
Corporate Treasury
lgribben@uk.ey.com
lcounsell@uk.ey.com
+44 207 951 4213
+44 207 951 8294
Page 14
Financial Accounting Advisory Services | Treasury services for corporate transactions
EY | Assurance | Tax | Transactions | Advisory
About EY
EY is a global leader in assurance, tax, transaction and advisory
services. The insights and quality services we deliver help build trust
and confidence in the capital markets and in economies the world over.
We develop outstanding leaders who team to deliver on our promises
to all of our stakeholders. In so doing, we play a critical role in building
a better working world for our people, for our clients and for our
communities.
EY refers to the global organization, and may refer to one or more, of
the member firms of Ernst & Young Global Limited, each of which is a
separate legal entity. Ernst & Young Global Limited, a UK company
limited by guarantee, does not provide services to clients. For more
information about our organization, please visit ey.com.
© 2015 EYGM Limited.
All Rights Reserved.
EYG no. AU3551
BMC Agency
BACS 1002437
ED None
This material has been prepared for general informational purposes only and is not intended to
be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for
specific advice.
ey.com