Treasury is assuming a larger role in making M&A deals successful, demanding a more proactive and strategically integrated organization.
Mergers and acquisitions pose unique challenges for the treasury department. A successful integration requires proactive management of strategy, organization, people, processes, technology, and contractual agreements. That makes treasury a crucial strategic partner throughout the process, directly influencing financial success and seamless integration.
The treasurer’s role, personally, is growing as well, says Matthew Davies, head of Global Payments Solutions, EMEA and global co-head of Corporate Sales, GPS at Bank of America (BoA).
“This strategic approach can be a career-defining moment for them,” he says, “as they focus not only on financing but also on contributing to broader M&A synergy targets and integration goals that impact the entire organization.”
Early treasury involvement is crucial to a successful integration.
“A common error lies in the absence of early engagement by treasury, which leads to perpetual efforts to catch up,” says Davies. “When engagement is limited to strategic financing, executionphase participants often focus solely on financial settlements, resulting in a significant lag in developing an integration plan.”
Helping develop and implement the integration plan is where treasury makes its most substantial contribution, he argues: “Neglecting this crucial element places an organization at a disadvantage, ultimately impacting outcomes. This significant oversight likely contributes to the considerable number of mergers and acquisitions that frequently fall short of performance expectations, if not outright failures.”
From Due Diligence To Post-Integration
Another common pitfall, Davies observes, is underestimating the inherent complexity of integration, which often accompanies a lack of strategic planning. “In terms of an M&A transaction, speed and agility are paramount,” he says. “Intricate and cumbersome treasury processes can severely impede these essential qualities.”
When conducting financial due diligence on an M&A deal, Davies says, the treasurer needs to assess four key factors beyond standard financial concerns: treasury organization and strategy; system infrastructures like enterprise resource planning and treasury management systems; and treasury workflow and processes like account structures and talent distribution.
For both sellers and buyers, identifying a strong financial due diligence partner for an anticipated upswing in deal activity is critical. Sellers should focus on sell-side readiness by professionalizing finance, tracking KPIs, preparing leadership, and conducting financial due diligence to increase transparency and reduce surprises. Buyers need to evaluate the target’s strengths and weaknesses, assess reported earnings and net working capital, identify debt-like items and critical risks, validate investment assumptions, and identify financial issues for the purchase agreement.
BoA’s post-integration checklist covers several key areas, managed by its advisory team. These include prioritizing synergy targets by establishing short and long-term KPIs including cash visibility, account access, rationalization, working capital metrics, and forecasting accuracy, and ensuring consistent structures and policies across the combined organization, such as consolidating notional pools and centralizing shared service centers.
“A crucial post-deal step is analyzing the vendor master file, accounts payable, and accounts receivable to align terms for common suppliers and customers,” says Davies. “Managing liquidity is vital, incorporating new requirements and adapting to new regulatory environments. Implementing best practices, such as centralizing operations or transitioning to electronic payments, is also paramount.”
A critical but often overlooked final step is analyzing successes and failures. “Highly acquisitive companies often miss integrating lessons learned before proceeding to the next acquisition, despite having dedicated teams and playbooks,” Davies notes.
When Salesforce acquired chat software developer Slack in 2021, its treasury team integrated Slack’s treasury function into a larger, global enterprise. Teams aligned policies, established joint platform-integration teams, and created a unified digital HQ, provided training on Salesforce’s systems, and met global standards.
In May, Salesforce agreed to acquire AI-powered enterprise cloud data management firm Informatica. Once again, Salesforce’s treasury will play a strategic role, funding the deal with cash and new debt while adhering to a structured M&A framework. Its goal is to increase non-GAAP operating margin—earnings per share—and free cash flow by the second year. Treasury will also manage the capital return program.
Treasury’s role, focusing on financial discipline and strategic alignment, is key to the firm’s “methodical, patient, and decisive” acquisition strategy, which aims to accelerate execution for market differentiation and stakeholder benefits, says Robin Washington, president and chief operating and financial officer.
Banking Support And AI
Some banks’ treasury and cash management offerings now include services aimed specifically at M&A. One such is Standard Chartered’s Cash Management Treasury Advisory specialist team, which has offices worldwide.
“The team also supports our clients’ requests on a wide range of post-spin-off treasury advisory and transformation solutions,” notes Mahesh Kini, global head of Cash Management and a member of the bank’s Transaction Banking Management Team. Some of the most indemand solutions, he says, are in-house bank structures, regional treasury center (RTC) setup or relocation, TMS/ERP modernization or setup, and improving management of clients’ working capital.
“Today, corporates are increasingly relying on their treasury function to support their growth agenda, enhance the efficiency of their capital and their operations, and provide an appropriate and scalable organizational setup and structure to enable business growth,” Kini observes. “A strong treasury function also allows companies to achieve robust risk management, to hedge against market and foreign exchange volatility. These advisory solutions are especially important for private equity investments that need efficient treasury setups that enable them to scale, grow, and exit within their investment timelines.”
Standard Chartered recently supplied a private equity-sponsored, Asian-based client with pre-M&A treasury advisory and RTC setup support. The successful establishment of the RTC in Hong Kong gave the client a solid foundation to execute its M&A strategy and expand into eight Asian markets.
“The client used an in-house bank and pool header to allocate internal funding from the RTC to support this expansion without the inefficiency of depending on decentralized financing in separate subsidiary locations,” Kini notes.
Standard Chartered also supported a client in post-M&A treasury advisory and RTC setup. To support expansion across Asia, the client relocated its Australian RTC to Singapore, requiring the formation of a new Singapore-based treasury team, repositioning the RTC role as an in-house bank, and triggering an assessment and overhaul of its TMS. The strategic move highlights the increasing complexity and demands on treasury of M&A.
In parallel with these evolving operational needs, AI is rapidly transforming treasury operations in M&A: automating manual tasks, providing deeper insights, and streamlining post-merger integration. AI simplifies complex cash flow forecasting by integrating data from various sources and currencies to provide a more dynamic and precise financial view. This contrasts with traditional manual methods that yield static, quickly outdated forecasts.
On the operational level, AI utilizes machine learning (ML) models within TMS for real-time data aggregation and natural language processing to standardize data formats. ML models analyze historical and real-time data to predict patterns and facilitate scenario analysis to stress-test liquidity. AI systems continuously monitor transactions for anomalies and potential fraud. Benefits to treasury include increased efficiency, improved accuracy, enhancing risk management through real-time monitoring, and arriving at better strategic insight through rapid scenario analysis.
While AI is helpful in multiple ways, the evolving landscape of M&A demands a proactive and strategically integrated treasury function, requiring early engagement, robust due diligence, and a focus on post-integration success. The strategic partnership between treasury and other departments including legal, tax, and operations, is crucial for a successful M&A outcome. Leveraging advisory services and embracing technological advances will further help treasury to navigate the complexities of M&A, drive enhanced financial performance, and secure long-term organizational value.
