A Long-Term Partnership for M&A Success
by Lance Kawaguchi, Managing Director, Global Head - Global Banking Corporates, Global Liquidity and Cash Management, HSBC
Against the pressures of plummeting energy prices and competitive and geopolitical challenges on one hand, and the need to invest in efficient extraction techniques and sustainable energy on the other, corporations in the Natural Resources & Utilities sector have been quick to refocus and revitalise their corporate strategy in recent years. One of the most significant outcomes of this has been exceptional levels of M&A as companies divest non-core assets and realign their supply chains.
This has significant implications for treasurers, who typically need to work against the clock to integrate or divest businesses quickly to avoid business interruption and gain rapid control over group liquidity and risk. Furthermore, the M&A process is often not simply a ‘one off’ project but a series of diverse projects that need to be managed concurrently or in rapid succession. To support treasurers through these challenging times, HSBC has put together a series of articles that together comprise a Cash Management Guide to M&A for the Natural Resources & Utilities sector, providing greater visibility over the tasks, and sharing experiences of our expert team within the business, and those of our clients to help treasurers overcome the pitfalls and maximise success.
In the first two articles in this series, we offer an overview of the M&A landscape in the Natural Resources & Utilities sectors, and identify some of the key cash management issues that treasurers need to consider when embarking on an M&A integration or divestment project. This is accompanied by a practical case study from integrated energy company CEPSA (Compañía Española de Petróleos, S.A.U.). This describes the integration of Coastal Energy, whose principal assets were in Asia, a region in which CEPSA previously had relatively little experience, and how CEPSA and HSBC worked together to deliver a successful integration project. These articles will be followed in turn by features that drill down on some of the M&A related cash management challenges in different regions, and some of the specific liquidity issues that treasurers need to consider.
A key theme that permeates these insight articles is the importance of a banking partner with the experience and skills, innovative and robust technology, and quality and reach of network to support the integration and divestment process. At HSBC, for example, we offer dedicated resources to rationalise and optimise cash and liquidity management structures, including managing the process of opening and closing tens or even hundreds of bank accounts. Key to the success of an M&A integration project is to be able to process transactions and information flows seamlessly, securely and efficiently, so we employ specialist ERP teams to connect our systems to our customers’ ERP and treasury management systems for straight-through processing.
When corporations look for a cash management bank, particularly a partner that can support them through strategic projects as well as day-to-day activities, they need to trust in that bank’s ability to support them in the long term, across their geographic footprint. This level of trust is one of the key reasons why corporations in the Natural Resources & Utilities industries choose to work with HSBC as their M&A partner. We are committed to improving our propositions through technology investment and innovation, one of the cornerstones of cash management efficiency, as well as the strength of our network. With cash management positioned as one of the bank’s strategic priorities globally, customers can be assured of our skills, network, technology and long-term commitment to supporting their M&A transactions and facilitating treasury’s contribution to success.