Is it a double wedding for Barclays and ABN Amro and BofA and LaSalle? Don’t send presents yet

The pending sale of LaSalle Bank to Bank of America looks like a “shrewd move” to global treasury consultant Jeff Wallace, managing director of Greenwich Treasury Advisors LLC, Boulder, Colo. If the announced sale goes through (it was being challenged at press time), it gives BofA a stronger foothold in the Midwest, a larger portfolio of middle-market clients and a dominant position in the Chicago lockbox market, he notes. But it could disrupt operations for companies that relied on LaSalle for domestic cash management and ABN AMRO for global cash management once that connection is severed, he explains. It probably means unemployment for the shared ABN/LaSalle staff in Chicago that handled global activity, he adds.

LaSalle would bring BofA a “great franchise in a great market,” observes consultant David Robertson, partner in Treasury Strategies Inc. “LaSalle has proven to be a very effective and creative provider of treasury and working capital solutions.” LaSalle also comes with a pool of human talent that is scarce in today’s treasury services market, he says. BofA can offer LaSalle clients more foreign currency and merchant acquisition services than they can currently receive, he adds.

If Bank of America acquires LaSalle, it will want the international business of LaSalle clients and try to displace ABN Amro, agrees Anthony Carfang, another Treasury Strategies partner. This could be disruptive in the short run for individual clients, he concedes, but nothing that wouldn’t work itself out over time.

Globally, “it will take Barclays years to integrate the ABN Amro empire, which has always been heavily decentralized,” Wallace suggests. “Effectively, ABN Amro’s retreat from the global cash management game will accelerate. Who’s to say that Barclays will not sell ABN Amro’s Latin American presence to Banco Santandar, which is really what Santandar wants anyway?” he speculates. “This effectively leaves Barclays with a relatively good Asian presence—a region that has excellent growth prospects—plus the European Union, which is Barclays’ primary focus.”

The real question is whether this is the start of the dominos falling in Europe. Will this move set off the long awaited European bank consolidations in 2007? “My guess is that it will not,” Wallace says. “I think we will need to wait until about 2009 or 2010 when SEPA makes a mockery of country borders and the relatively small, uneconomic banks of Europe, with the entrenched management, will finally be unable to resist consolidation due to very low stock prices.”

Stay tuned to the cash conversion space for more deals

For JPMorgan Chase, a major corporate treasury services bank, to buy Xign Inc., a software/services company in the cash conversion cycle space, is a sign of the times, treasury services analysts agree. “Expect to see more deals of this type,” says consultant Craig Jeffery, managing director of Strategic Treasurer in Atlanta.

Faced with flat revenue from traditional products, banks are moving aggressively to expand into value-added components of the financial supply chain, notes Anthony Carfang, founding partner of Treasury Strategies Inc. “Processing payables, receivables, order entry—everything that touches the working capital chain—is fair game for banks now,” he notes. “They are radically expanding the definition of payment processing.”

The first wave has seen JPMC buying Vastera and Fisacare; Mellon Bank acquiring SourceNet and ClearTran; and Bank of America adding Works and HealthLogic, notes David Robertson, Chicago-based partner of Treasury Strategies.

The motivation behind the trend: Banks have to address the cash conversion cycle, and they need a partner to do it. All of the far-sighted treasury banks are working with partners or exploring partnerships, some of which will lead to acquisitions, Jeffery notes. “Banks have been partnering with technology-based service firms in the order-to-pay and order-to-collect space to expand their treasury services,” he explains. “Chase has partnered with Xign for three-and-a-half years and they have a number of joint customers.”

The announced deals “put chum in the water and will instigate a minor feeding frenzy,” Jeffery suggests, pushing other banks to make their own moves.” That frenzy could spread to the treasury workstation market, he says. Banks with strong ambitions to expand their role as concentration banks could target a treasury workstation vendor, he speculates.

Xign, of course, has other banking partners, who now have to decide whether to remain customers of an operation owned by a rival bank when current contracts expire. However, the number of alternative providers is limited, and strong providers like TradeCard and Payformance could also become bank acquisitions anyway, he adds.

Banks exited the treasury software business in the 1980s because of the high cost of supporting upgrades, but today’s hosted solutions have lowered those barriers, and companies like Xign are at least as much service companies as they are software companies, Jeffery points out. “They’re likely to hesitate over a treasury workstation acquisition due to painful memories of trying to offer client/server solutions in the past, but today’s technology makes it far easier to integrate a hosted treasury workstation into bank systems than that older technology did,” he says. “Technology doesn’t change everything, but it certainly is changing treasury operations in the transaction and treasury workstation/cash system arena,” he concludes.

While independent software/service companies tend to be focused on one part of the working capital chain and don’t immediately offer holistic, integrated solutions, Carfang concedes, he doesn’t think integrated treasury workstation solutions would be high on banks’ target lists at this time.

The Xign acquisition is “symptomatic of banks going after the 93% of spend by treasurers and controllers that banks are not getting,” Robertson points out. “Large banks like Morgan have the resources to buy new solutions and integrate them into their core offerings. They’re determined to move beyond the maturity plateau and extend their scope and tap into new revenue streams from their existing clients. The end game is to provide deeper solutions and advise clients on a wider range of issues, making them more important to those clients.”

“This is an exciting time in the payments arena,” Carfang concludes. “Most of the major players are rethinking their strategies and building out their product lines. “In addition to the bank acquisitions, we have Warburg Pincus investing in Metavante, on top of its investments in the merged Trema and Wall Street Systems companies, and we have KKR buying FirstData, which is huge. This is truly a time when sea changes are starting to emerge.”

Business Objects scoops up Cartesis

Business Objects, a French $1.3 billion provider of business intelligence (BI) software, announced on April 23 that it was acquiring privately held Cartesis S.A. for $300 million. Cartesis, an enterprise performance management company, provides financial reporting, consolidations and planning capabilities, as well as a new governance, risk and compliance (GRC) portfolio. Cartesis, with annual revenues of $125 million, was founded in 1990 and has 1,300 customers worldwide. The acquisition comes less than a week after Oracle Corp. closed on its $3.3 billion for Hyperion Solutions.

“Overall, it’s a good pickup for Business Objects,” observes John Hagerty, vice president of research for AMR Research. With the Cartesis acquisition, “Business Objects has sent a clear signal that it’s planning to grow—and remain independent rather than be acquired by the Oracles of the world,” he adds.

Hagerty notes that a few years ago Business Objects had kicked the tires on Cartesis and a few other GRC vendors, but ended up buying SRC Software (which is now renamed Business Objects Planning). “At that point, Business Objects felt that to get [to] the CFO, it needed more about planning,” Hagerty says. Now, Business Objects recognizes that the gap it must fill is in financial reporting and GRC space, he notes. “Especially on the risk side, we’re seeing a lot more appetite from CFOs and companies—above and beyond the Sarbanes-Oxley compliance issues,” Hagerty concludes.

Budgeting and forecasting leave much to be desired

For companies, budgeting and forecasting are among their most important activities. Unfortunately, very few are satisfied with the processes surrounding these two functions, according to a new study of large companies from accounting firm PricewaterhouseCoopers (PWC).

The study found that most (56%) of the 200 respondents—“C-level” executives, vice presidents or directors with deep knowledge of financial planning processes at companies with $2 billion in revenue and more—believe that too much of the time and money spent on budgeting and forecasting goes toward low-value activities, such as data collection and consolidation, approvals and report preparation. The processes are also not particularly automated with 70% of respondents still depending on spreadsheets to plan. Only 17% of those participating in the survey were satisfied with the current processes; of the remaining participants, 70% said they were somewhat satisfied with the financial planning process, while the remaining 13% said they were not satisfied.

And the biggest problem, it would seem, is a massive disconnect between budgeting and planning and actual performance and strategizing. Fewer than one in three felt that budgeting and forecasting was aligned with actual performance, and 52% said that creating tighter linkages between strategy and finance was a top priority.

But there’s no time like the present to address the problem since 65% believe that the importance of budgeting and planning is destined to increase over time. “When we look at best-practices companies, they’ve really got the budgeting and forecasting process down, where it’s more of a dialogue, a strategic discussion,” says Gary Apanaschik, a partner in PWC’s finance effectiveness practice. “Finance can’t be in a silo of their own. They need to reach out and act as a catalyst.”

People on the Move

Celestica Inc., the $8.5 billion Toronto-based provider of innovative electronics manufacturing services, based in Toronto, has named Paul Nicoletti interim CFO. Nicoletti, 39, the senior vice president of finance, replaces Anthony Puppi, who retired in April. The company is conducting a search for a permanent replacement.

Aspen Insurance Holdings Ltd. appointed Richard Houghton CFO of the $1.9 billion insurer, which has headquarters in Hamilton, Bermuda. Houghton, 41, succeeds Julian Cusack, who has been named CEO and chairman of an Aspen Insurance Holdings Ltd. subsidiary. Houghton is making the transition from Royal Bank of Scotland where he served as CFO. Prior to that he was group finance director at RBS Insurance

La-Z-Boy Inc., the $1.9 billion residential furniture producer, with headquarters in Monroe, Mich., has announced that Mark Stegman, the company’s corporate vice president and treasurer, has resigned after accepting a financial position with Brown- Forman Corp. A search for a new treasurer has begun. Until a replacement is chosen, the company has a treasury team that will take over Stegman’s duties.

CACI International Inc. appointed Thomas A. Mutry CFO and treasurer of the $1.8 billion IT and network solutions provider, based in Arlington, Va. Mutry, 52, had been acting CFO and treasurer since January 2007. Along with his permanent appointment, he will continue to serve as executive vice president. He joined CACI in September 2006 as executive vice president of corporate development and treasury. Mutry had served as CFO for U.S. Airways Group Inc. from 1998 to 2002. From there, he joined GTSI Corp., where he continued his experience as CFO.

Hexcel Corp., the $1.2 billion developer, manufacturer and marketer of advanced structural material, based in Stamford, Conn., has announced that CFO Stephen Forsyth is planning to resign, effective April 27, 2007. He has accepted a position with Chemtura Corp. The company has also named Wayne Pensky senior vice president and CFO. Pensky, 51, joined Hexcel as corporate controller in July 1993. He began serving as vice president of finance and controller of Hexcel’s composites global business unit in 1998.

Take-Two Interactive Software Inc., the $1 billion developer, marketer, distributor and publisher of interactive software games based in New York, has announced the departure of CFO Karl Winters, effective immediately. Senior vice president of finance Lainie Goldstein has been named acting CFO while the company begins a search for a permanent replacement.

Integrated Electrical Services Inc. named Raymond Guba senior vice president and CFO of the $950 million provider of electrical solutions, based in Houston. Guba, 47 replaces David Miller, who will remain with the company to ensure a smooth transition. Most recently Guba served as CFO of Kraton Polymers LLC in 2005 through 2006. Earlier, he spent 19 years at General Electric Co., where he held numerous senior management positions, including CFO of I&FS Division of GE Energy and CFO of GE Auto Financial Services. Prior to joining GE, he worked in public accounting at PricewaterhouseCoopers LLC, and Meahl McNamara & Co.

Kaman Corp. has named John J. Tedone vice president of finance of the $1.2 billion corporation that conducts business in the aerospace, industrial distribution and music markets, with headquarters in Bloomfield, Conn. Tedone, joined Kaman in 2004 as assistant vice president of internal audit and was promoted to vice president of internal audit in 2006. Before going to Kaman, he served as director of finance-strategic marketing at Diageo North America. He has also worked with United Technologies Corp. and KPMG.

St. Joe Co., a $748.2 million real estate development company based in Jacksonville, Fla., has appointed William S. McCalmont CFO. McCalmont, 51, joins St. Joe due to the retirement of Michael N. Regan. McCalmont enters the company with over 20 years of experience, having held various senior management roles with companies, such as Harrah’s Entertainment, La Quinta and Embassy Suites. Most recently he served as CFO and executive vice president for Ace Cash Express, Inc.

To get a handle on healthcare costs, you must first get a handle on the risks faced

Healthcare tools maker SHPS, which is based in Lousiville, Ky., has introduced a health risk engine that allows employers—and employees—to manage their health expenditures effectively. The new tool lets self-funded employers quantify health risks among its employee population and actively monitor the drivers of those risks as part of an effort to contain healthcare costs. “Traditional healthcare purchasing patterns among employers have focused on the flow of dollars, rather than the flow of care,” says Krishnan Sastry, executive vice president for strategic development and innovation at SHPS. “The SHPS health risk engine lets an employer understand both his flow of dollars and his flow of care. This can help in fashioning healthcare strategies. Understanding your employee population’s healthcare risk and what sorts of services need to be provided going forward can help mitigate those risks, especially for those who have emerging risks.”

The health risk engine tool generates an employer health index and personal health index. Using the demographics provided by the employer, along with the healthcare utilization data from providers, the health risk engine creates customized indexes for each plan sponsor and individual. The SHPS health risk engine can be tailored to the company’s unique employee profile, allowing employers to monitor the performance of their multiple health plans. It also can permit companies to drill down to specific risks within their population, determine the level of care needed and trigger clinical interventions. Companies can institute wellness management programs that address risks, such as gaps in care, medication compliance and individual employee behavior. The tool is hosted on SHPS servers and reports to clients are presented by SHPS consultants. Among SHPS’s client list is $5.1 billion telecommunications equipment maker Avaya Inc.

“Just as you need the tools to manage financial risk, an employer needs to manage the clinical risk,” says Sastry. “What SHPS health risk engine does is not only quantify risk, but it also provides the stakeholders the necessary tools to address them.” Among the stakeholders are SHPS staff members, who act as consultants to plan sponsors to help them understand their employee populations and which care management programs need to be in place.

These are remote deposit capture solutions built to fit a user’s volume

NetDeposit Inc., a check payment technology provider, has released two new remote deposit capture (RDC) products, NetCapture Business and NetCapture Business Pro, which are tailored to meet the needs of businesses of various sizes. Web-based NetCapture Business enables small to midsize companies and banks or those with small to midsize check volumes to: capture checks at one or more locations using intuitive capture software that is delivered though a Web browser; access deposit information centrally; capture accounts receivables data, such as invoice or account number; capitalize on the advantages of a Web-based, thin-client technology that is necessary for wide distributed deployments.

NetCapture Business Pro is a robust, thick-client software, residing on the user’s machine. It is designed for large corporate accounting and treasury operation organizations with high volume deposit demands, allowing financial institutions to provide the robust capture features necessary in complex treasury operations. NetCapture Business Pro allows organizations to: capture high volume of checks at multiple locations, use feature-rich desktop software; maintain audit and operational controls over deposit preparation and release; centrally access intra-day deposit and receivable reporting from distributed locations; and capture accounts receivable data, such as invoice and account numbers and other transactional information.

NetDeposit, which is based in Salt Lake City, is a subsidiary of Zions Bancorporation.