Mergers and acquisition (M&A) pose various challenges for treasury management in an organization. A company inherits disparate treasury systems and processes after acquiring another company, which presents significant challenges for the treasury and financial management teams. According to a study by Deloitte, it was found that almost 30 percent of companies seek acquisitions to extend and diversify their product line, expand their customer base, and capture new and emerging technologies.
Despite the hike in interest rates, acquisitions remain the preferred choice for businesses to boost productivity and growth. These acquisitions keep the treasury management teams busy with the process of identifying, gauging, and minimizing the operational and organizational risks that are inherent in these transactions. The teams also face a lot of challenges to integrate the treasury management operations of the acquired company as integrating a fully functional treasury department into a single cohesive unit can be an arduous and time-consuming process.
Organizations need to draft an effective acquisition strategy to meet the requirements of their treasury management team. An efficient strategy to integrate the treasury teams can centralize funds and eliminate any inconsistencies in cash management, resulting in a significant improvement in the cash flow and profitability. The strategy also needs to adhere to the compliance regulations for corporate mergers, and it should emphasize on extracting best return on investment (ROI).
Treasury management teams in the organization need to have a clear vision of the objectives and goals before an M&A operation. An analysis of all the resource constraint can make the integration process quicker and easier for the company, which can help in streamlining the entire process of acquisition.
Companies need to assess the estimated liquidity and working capital to know the amount required by the acquired company to cover disbursements and service debt. The management also needs to take into account all the people, processes, and other aspects that might have an impact due to the integration of the teams of both the organizations.