Technology Banking
growth | 2 minute read

Four ways to smoothly navigate your M&A transition

Post-deal considerations for a smooth financial integration

72% of tech CFOs expect an increase in M&A deal volume this year

When a tech company undergoes a merger or acquisition, the post-deal integration can be daunting for the CFO and treasurer. M&As create a number of challenges: From disparate ERP systems to differing cash management practices to simply tracking down each entity’s bank accounts.

Effective integration planning is the number-one factor in M&A success.2 Involving finance early will improve the process.

Keep your transition on track with attention to these four critical areas:

1. Understand your new corporate structure

Every situation is unique, and your approach will vary based on the specifics of the deal and your new organization. For example, in a traditional acquisition, the purchased entity will have an existing financial infrastructure that includes bank accounts, systems, and staff, which you can rely on in the early days for continuous operations.

By contrast, a carve-out structure means the new entity may depend on the acquiring company for all treasury management services. If you have a merger of equals, decision-making power may be shared between the two entities or result in one organization in a leadership position.

A copy of your transition services agreement will detail which financial functions the previous owners will maintain during your transition, for how long, and at what cost. Meeting these deadlines will affect your integration timing and costs.

Work with your legal and tax teams to document each legal entity, its tax IDs, bank accounts, authorized signers, and board resolutions. Also, determine how funds will need to flow between your operating units and accounts.

2. Inventory your existing financial systems and bank services

Before making changes, get a clear picture of the ERP, treasury management, and proprietary systems in use for invoicing, receivables, payables, cash management, and reporting. List the payment methods and channels in use (such as web, IVR, and lockbox) and your merchant processing IDs. Finally, determine what’s required to forecast receivables and payables, obtain your daily cash position, and transfer funds among entities.

As you make integration decisions, begin with inconsistent or duplicated tools and processes. Look for web- and cloud-based solutions that can reduce IT costs, and areas where a single bank or provider can support multiple services. Consider also how to create a streamlined experience for customers and suppliers across your enterprise.

3. Tally up your financial responsibilities

Calculate your combined debts, investments, and tax liabilities, and identify where idle cash resides. Review your purchase agreement terms and whether they allow for consolidating debt. Then develop a consistent strategy to eliminate unnecessary borrowing and optimize your working capital.

4. Determine your priorities

Use the information you’ve gathered to define your immediate, short- and long-term priorities. This includes which functions you’ll handle centrally, such as revenue forecasts or investment sweeps, and which you’ll maintain at a subsidiary or local level.

If you plan to consolidate operations to a single ERP system, identify your timeline, budget, and resources for the transition.

While you may encounter M&A activity only a few times in your career, remember, many financial institutions tackle these challenges every week. Early guidance from an experienced bank can help you navigate a potentially overwhelming situation with best practices and real-world examples.

Disclosures
  1. “2017 BDO Technology Outlook Survey,” BDO USA LLP, 2017.
  2. Deloitte, “M&A Trends, Year-End Report 2016.”
« Return Home

How can we help you grow?

A broader perspective can help you build a better future for your business. Let's explore more angles today.

All fields are required unless labeled "optional".

We look forward to speaking with you.

Thank you for your interest. We'll contact you shortly to learn more about your business needs and discuss how we can help you reach your financial goals.

Disclosures

Securities Products:

Not Insured by FDIC or any Federal Government Agency

May Lose Value

Not a Deposit of or Guaranteed by a Bank or Any Bank Affiliate

© 2019 Wells Fargo Bank, N.A. All rights reserved. Deposit products offered by Wells Fargo Bank, N.A. Member FDIC. Deposits held in non-U.S. branches are not FDIC insured.

Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, and Wells Fargo Bank, N.A. Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC are distinct entities from affiliated banks and thrifts.

© 2019 Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Managed Account Services and Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company. Neither Wells Fargo Funds Distributor nor Wells Fargo Funds Management holds fund shareholder accounts or assets. This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.

© 2019 Wells Fargo Capital Finance. All rights reserved. Products and services require credit approval. Wells Fargo Capital Finance is the trade name for certain asset-based lending services, senior secured lending services, accounts receivable and purchase order finance services, and channel finance services of Wells Fargo & Company and its subsidiaries.

Wells Fargo & Company conducts business outside the U.S. through various companies, including duly authorized and regulated subsidiaries and affiliates in Asia, Canada, and Latin America. In Europe, banking services are provided through Wells Fargo Bank International (WFBI), directly regulated by the Central Bank of Ireland, and Wells Fargo Bank, N.A. London Branch, authorized by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. All products and services may not be available in all countries. Each situation needs to be evaluated individually and is subject to local regulatory requirements.

We provide links to external websites for convenience. Wells Fargo does not endorse and is not responsible for their content, links, privacy or securities policies.

Important notice regarding use of cookies: By continuing to use this site, you agree to our use of cookies as described in our Digital Privacy and Cookies Policy.

The opinions expressed in this document are general in nature and not intended to provide specific advice or recommendations for any individual or association. Contact your banker, attorney, accountant or tax advisor with regard to your individual situation. The opinions of the author do not necessarily reflect those of Wells Fargo Capital Finance or any other Wells Fargo entity.

The information in this report is for educational purposes only and should not be used or construed as financial advice or a recommendation to participate any strategy mentioned herein. Wells Fargo does not guarantee that the information supplied is complete, undertake to advise you of any change in its opinion, or make any guarantees of future results obtained from its use. The concepts discussed in the paper require the assistance of qualified legal counsel and tax advisors, and investors should consult their own attorneys and tax advisors with respect to their own situations.

  1. Silicon Valley Top 150 2017 Silicon Valley Top 150 Public Technology Companies Rankings by Annual Revenue

Disclosures

Securities Products:

Not Insured by FDIC or any Federal Government Agency

May Lose Value

Not a Deposit of or Guaranteed by a Bank or Any Bank Affiliate

© 2019 Wells Fargo Bank, N.A. All rights reserved. Deposit products offered by Wells Fargo Bank, N.A. Member FDIC. Deposits held in non-U.S. branches are not FDIC insured.

Wells Fargo Securities is the trade name for the capital markets and investment banking services of Wells Fargo & Company and its subsidiaries, including but not limited to Wells Fargo Securities, LLC, a member of NYSE, FINRA, NFA and SIPC, Wells Fargo Prime Services, LLC, a member of FINRA, NFA and SIPC, and Wells Fargo Bank, N.A. Wells Fargo Securities, LLC and Wells Fargo Prime Services, LLC are distinct entities from affiliated banks and thrifts.

© 2019 Wells Fargo Asset Management (WFAM) is a trade name used by the asset management businesses of Wells Fargo & Company. Wells Fargo Funds Management, LLC, a wholly owned subsidiary of Wells Fargo & Company, provides investment advisory and administrative services for Wells Fargo Managed Account Services and Wells Fargo Funds. Other affiliates of Wells Fargo & Company provide subadvisory and other services for the funds. The funds are distributed by Wells Fargo Funds Distributor, LLC, Member FINRA, an affiliate of Wells Fargo & Company. Neither Wells Fargo Funds Distributor nor Wells Fargo Funds Management holds fund shareholder accounts or assets. This material is for general informational and educational purposes only and is NOT intended to provide investment advice or a recommendation of any kind—including a recommendation for any specific investment, strategy, or plan.

© 2019 Wells Fargo Capital Finance. All rights reserved. Products and services require credit approval. Wells Fargo Capital Finance is the trade name for certain asset-based lending services, senior secured lending services, accounts receivable and purchase order finance services, and channel finance services of Wells Fargo & Company and its subsidiaries.

Wells Fargo & Company conducts business outside the U.S. through various companies, including duly authorized and regulated subsidiaries and affiliates in Asia, Canada, and Latin America. In Europe, banking services are provided through Wells Fargo Bank International (WFBI), directly regulated by the Central Bank of Ireland, and Wells Fargo Bank, N.A. London Branch, authorized by the Prudential Regulation Authority (PRA) and regulated by the Financial Conduct Authority (FCA) and the PRA. All products and services may not be available in all countries. Each situation needs to be evaluated individually and is subject to local regulatory requirements.

We provide links to external websites for convenience. Wells Fargo does not endorse and is not responsible for their content, links, privacy or securities policies.

Important notice regarding use of cookies: By continuing to use this site, you agree to our use of cookies as described in our Digital Privacy and Cookies Policy.

The opinions expressed in this document are general in nature and not intended to provide specific advice or recommendations for any individual or association. Contact your banker, attorney, accountant or tax advisor with regard to your individual situation. The opinions of the author do not necessarily reflect those of Wells Fargo Capital Finance or any other Wells Fargo entity.

The information in this report is for educational purposes only and should not be used or construed as financial advice or a recommendation to participate any strategy mentioned herein. Wells Fargo does not guarantee that the information supplied is complete, undertake to advise you of any change in its opinion, or make any guarantees of future results obtained from its use. The concepts discussed in the paper require the assistance of qualified legal counsel and tax advisors, and investors should consult their own attorneys and tax advisors with respect to their own situations.

  1. 2017 Silicon Valley Top 150 Public Technology Companies Rankings by Annual Revenue.