1st Finance Integration Charter

Mission / Objectives

Pre-Close / Planning

  • Retention Plans: work with teams to define costs
  • Day 1: Develop plans to ensure readiness for Close
  • Org. Structure: Finance team migrates to Acquirer's reporting Day One
  • Annual Spend: schedules reviews to control and manage; identify opportunities to reduce spending (duplicate functions, projects, activities); control payables and accruals
  • Rev. Rec. / ASC 606: align accounting treatment; revenue roll forward; forecasts
  • Earnouts: establish collaborative investment planning and decision-making processes
  • Audits: complete Acquired Co. audit by Sep. 15; define ongoing sec compliance requirements
  • FP&A: align management reporting, define budgeting process, policies

Day One / Close

  • Treasury: gain control of capital; bank account cutover; signature cards; cash/debt reporting, FX
  • Tax: legal entity structure established; signatures obtained; tax filing calendar established; align tax compliance, planning, and audit mgmt.
  • Accounting: Billing/AR/AP cutover; align policies; support Close and G/L Consolidation, align Rev. Rec. accounting treatment until implementation finished, map chart of accounts
  • Employee Onboarding: support ERP data migration, US Payroll migration; migrate cards to Amex; retention and offer letters
  • Sales: define compensation to support cross-selling
  • DOA: establish roles/limits in ERP system

Day 30+

  • Fixed Assets: migrate data and organize tracking and reporting in ERP
  • India Transfer Pricing: see Definitive Agreement protections; initiate plan to modify
  • VAT: see Definitive Agreement protections; initiate plan to modify
  • Annual Operating Budgets: schedule reviews to develop; align KPI's; define chargebacks/allocations; define new cost centers
  • QTC: support Quote-to-Cash Workstream planning
  • GTM: support Go-to-Market Workstream planning
  • Product Integration: support SKU/PID setup in ERP
  • Real Estate: initiate search for new space; identify and control all third-party relationships
  • Cost-to-integrate budget: establish budget, process, and controls for all workstreams

Integration Team

  • Executive
  • Leads
  • Extended Team Members
  • Advisors

Key Dependencies (identify functional team)

  • Employee Onboarding (HR, IT)
  • Communications (HR, Marketing)
  • Applications / Systems Access (IT, Hosting)

Out of Scope / Deferred Past 180+ Days

Risks / Mitigation Plan

  • Lease expires mid-next year
    Mitigation: perform site selection and renewal discussions immediately
  • India Transfer Pricing: cost plus model is 24% vs 15% resulting in higher taxes
    Mitigation: initiate plan to modify
  • VAT: high risk of Nexus; $100k estimate before penalties and interest
    Mitigation: initiate plan to modify
  • Staff Retention: loss of key talent and overload of work related to integration
    Mitigation: approve key retention packages; contract to backfill overloaded employees; initiate recruiting efforts

2nd Finance Integration Charter

Objectives

(Primary integration objectives to be achieved post close)
  • Implement optimal finance organization structure by end of year 1
  • Meet synergy targets by end of year 1
  • Seamless day 1 financial operations (pay employees, vendors, collect cash, combined financial reporting)
  • Financial system migration/consolidation during year 1
  • Consolidate and/or restructure debt and comply with covenants
  • Consolidate tax entities and comply with REIT requirements
  • Implement investor relations program to consider combined large cap investor opportunity/requirements

Scope

(Primary categories, systems, processes corporate or functional areas to be addressed in team's plan)
  • Accounting operations, financial reporting, investor relations, corporate planning, tax, treasury, bus development Western and Eastern operations
  • Finance organization and financial system consolidation
  • GL, AP, AR, HR/PR, MFG ERP, Treasury Operations, Tax Structure
  • Finance assumption: HR leads the initiatives related to payment of employees Day 1
  • Determine optimal financial systems platform and target systems consolidation/transfer onto common platform by end of year 1
  • Optimal combined debt structure
  • Acquirer and Acquired Co. legal entities
  • Segment reporting, first year IR program, 1Q and first year combined budgeting, forecasting, and guidance
Team Members Role/Deliverable % Time Commitment
Financial / SEC reporting 25%
Combine Tax organization 50%
Determine combined tax entity structure 25%
Combine Treasury organization 25%
Consolidate and/or restructure debt and related covenants 25%
Establish combined risk management/insurance program 25%
Consolidated financial systems 30%
Sector/regional level financial reporting 80%
Investor Relations 30%
Acquisitions and strategic divestitures 20%

Day 1 Mandatories

  • Retain key employees
  • Pay employees and vendors
  • Collect cash from customers
  • Comply with treasury requirements
  • Comply with tax requirements
  • Close the books and report internally and externally
  • Combined budget and forecasting process post-close
  • Investor communication and guidance

Day 1 Prep (Critical Information and/or assessment activities that must be completed pre-close)

  • Put retention incentives in place
  • Support HR benefit/pay changes and configuration of HR/PR system
  • Maintain lockboxes and remittance process
  • Debt consolidation plan
  • Legal entity consolidation plan
  • REIT compliance plan and process modifications
  • Stub period distribution planning
  • Determine level of consolidation
  • Conform accounting conventions
  • Implement reporting solution across multiple GLs/Systems
  • Plan for Acquirer / Acquired Co. budget consolidation and forecasting
  • Conclude on segments, combined 1Q and year guidance, IR plan

Issues/Risks

  • Acquired Co. employee day 1 benefits not configured in Acquired Co. HR
  • Financial system consolidation does not occur in time to capture synergies
  • Organization consolidation does not occur in time to capture synergies
  • Management reporting across two financial systems not effective
  • Gap in insurance coverages
  • IT capacity and prioritization

Cross-Team Dependencies

  • HR / IT
  • HR / IT / Western and Eastern Operations
  • HR / IT / Western Operations
  • IT / Western and Eastern Operations
  • Treasury / Risk Management
  • IT

3rd Finance Integration Charter

Objective

Full integration to Acquirer financial systems (short-term and long-term)

Scope

  • Establish PO process and approvals
  • Communicate new PO process to Acquired Co. employees
  • Implement SAP
  • Maximize supply chain (shipping, insurance)
  • Implement Concur T&E
  • Utilize indirect spending

Ensure Acquired Co. operations are sufficiently funded for ramp up

  • Bank wire transfers to acquired company bank account to fund daily operations
  • Establish approval limits for cash transactions
  • Communicate approval limits

NewCo sales maximization

  • Set up distribution model
  • Establish quote process and authorizations for discounting
  • Optimize commission structure
  • Allocate Acquired Co. sales budget appropriately by region
  • Set up all sellable parts in Acquirer sales deck

Ensure Acquired Co. financials are accurately represented for Acquirer consolidation

  • Write off any obsolete inventory
  • Ensure all fixed assets exist
  • Create tracking for Acquired Co. sales
  • Establish beginning balance sheet for Acquirer consolidation

Determine short-term and long-term financial reporting of Acquired Co.

  • Establish financial reporting structure (establish company code, legal entity, management units, cost center structure in SAP)
  • Establish SAP uploads of local trial balance from Acquired Co.
  • Map Acquired Co. chart of accounts to Acquirer's chart of accounts

Establish transfer pricing and tax strategy

  • Establish transfer pricing for materials shipped from Acquired Co., but sold by Acquirer
  • Determine tax approach for Acquired Co. losses
  • Set up legal entity and tax reporting
  • Establish various intercompany agreements

4th Finance Integration Charter

Scope

  • 1. Budget Process
  • 2. Insurance Coverage
  • 3. Limits of Authority
  • 4. Accounting Policies (German v IFRS)
  • 5. Reporting, Process & tools
  • 6. Purchase Price Accounting Exercise

Key Objectives

  • 1. Develop an efficient and sustainable financial reporting process for both shareholders and management team for NewCo
  • 2. Establish finance policies and procedure
  • 3. Set the budget for NewCo
  • 4. Accomplish most of the initiatives in first 90 days

Core Team Members

  • Team Lead:
  • Team Resources:
  • IMO Support:
  • Workstream Admin:

High-Level Milestones

  • Pre-Close: Budget for First 6 Months finalized
  • Day 1 + Day 30: Limits of authority distributed to NewCo. Reporting process established
  • First 6 months: Align insurance for all of NewCo. Internal Audit plan finalized. External Audit tender completed

Key Interdependencies

  • 1. Limits of Authority set
  • 2. Budget Process

Dependent on which Function

  • 1. Leg&A
  • 2. Commercial / Business Unit
  • 3. IT

Exit Criteria

  • 1. Sustainable reporting process is established
  • 2. Budget set and communicated to all stakeholders
  • 3. Critical policies and procedures (including limits of authority) established at the appropriate timeframe.

End States

  • 1. Reporting requirements for Acquired Co. are established and working efficiently and effectively
  • 2. Budget and forecast processes aligned
  • 3. Audit tender processes complete

Related Presentations