Going Dutch - Willis Towers Watson’s New Global Treasury Centre in the Netherlands
By Christof Nelischer, Global Group Treasurer, Willis Towers Watson plc
Following the merger between Willis and Towers Watson, the newly created Willis Towers Watson found itself in 2016 with a set of legal entities in various jurisdictions that were used for treasury transactions by the two legacy companies. It was obviously not an effective structure for the future of Willis Towers Watson, and we felt that a single, new entity was required to absorb and consolidate treasury activities from around the combined company. Our vision was for the new treasury entity to deliver a ‘Centre of Excellence’ and to further create a more unified treasury operation that can provide service to all of the company’s affiliates world-wide. The new entity would also improve the visibility and transparency of the treasury function.
At the same time, Willis Towers Watson’s businesses in Western Europe came into focus: following the merger and the acquisition of Gras Savoye, a French-based insurance broker, the new company had been conducting 20% of its business in Western Europe, with annual revenues in excess of $1bn. As a result, we decided to launch Willis Towers Watson’s inaugural €540m Eurobond in May 2016, raising funding in euros for the first time. Europe had the scale to merit a treasury team to support it and also cover other aspects of the business. The question was where should it be based?
As we considered various options, the UK voted to leave the EU. Given the uncertainty following Brexit, we wanted to keep any possible implications on our intercompany dealings away from our businesses. Locating our treasury centre in an EU member state would achieve just that.
Choosing the Netherlands
Willis Towers Watson chose the Netherlands as the location for the new Global Treasury Centre. Willis Group had been doing business in the country since 1965; Towers Watson since 2005. The combined company now employs nearly 400 associates in seven offices in the Netherlands. Amsterdam was already a familiar business location for our company, with established office locations that could accommodate the new team.
We value the Netherlands as a place to do business, with a rare AAA-credit rating of the sovereign. The Netherlands is ranked fourth in the Global Competitiveness Report 2016/17 by the World Economic Forum, the highest position of any EU member state. It is a core member of the Eurozone and has a proven track record as a domicile for euro cash management operations.
We found the Netherlands to be attractive for group financing activities. The tax treaties concluded by the Netherlands generally reduce the foreign withholding tax on interest paid to a Dutch company to substantially lower percentages, even to nil. Moreover, the Netherlands does not impose any withholding tax on interest or stamp duty. The one-tier board under Dutch law facilitates the instalment of a single board of directors for a Dutch N.V. or a B.V., which comprises both executive and non-executive directors, a structure that works well with the Anglo-American tradition of the one-tier board.
The country’s infrastructure is excellent, including world-class airports, high-speed road, rail and – importantly – broadband networks. Some 90% of Dutch speak English — the global business language — and many people are multilingual. And we follow the example set by other multinationals that have established similar operations in the Netherlands with great success.
Next, we defined the scope of the Global Treasury Centre. Much of that emerged by negative elimination, as there were regulatory requirements to keep certain activities in the respective country, especially for our UK broking business. We already had a strong treasury function in the US, and decided to leave our colleagues in Nashville to manage treasury matters in the Americas.
We decided to move work streams that were not location-dependent to the Netherlands, with a regional focus on Europe Middle East and Africa (EMEA), excluding the UK, as well as the Asia Pacific region. The treasury activities we decided to establish in the Netherlands Treasury desk revolve around the facilitation of movements of funds within Willis Towers Watson across the world, including:
- An in-house bank, absorbing intercompany lending mainly from what was previously carried out in the UK, Luxembourg and other legacy arrangements
- Closely related to this, our intercompany loan hedge programme, whereby the NL Treasury desk would take over active management of this risk, acting as principal
- Euro cash pool leader and master account holder for other currencies for cash concentration / cash repatriation purposes
- Coordination centre for our intercompany netting programme
For the Netherlands Treasury desk to be effective, it needs to exercise local managerial authority, be self-governing and closely co-ordinate its actions with the London desk. To avoid duplication of administrative work, we decided to task our UK-based back office, settlement and control functions to support the Amsterdam-based Global Treasury Centre as well. This move allowed us to leverage existing resources as well as our IT architecture to maximise the resources in Amsterdam without creating any fat. A market-facing Treasury desk on the same IT platform as the other Treasury teams around the world, minus an administrative function of its own, was an effective and powerful proposition.
Photo credit: NFIA