When a company makes more than 25 acquisitions a year, as Google recently did, a key cash management challenge is locking down the target company's cash as soon as the deal is signed. "When a company changes hands," notes Kenny Tse, a treasury analyst II at Google, "there's a tremendous risk of fraud. Individuals could make off with hundreds, thousands or even millions of dollars. No amount of hedging or insurance can cover losses due to poor control of funds." That's why Google treasury perfected a system that over a recent one-year period seized more than $3.5 billion in cash in more than 400 bank accounts in more than 50 countries just as soon as deals closed. Not a penny was lost.
The key to gaining quick control over cash is the clear, concise pre-close checklist that Google treasury gives to the company that has agreed to be acquired. It asks for banking documentation, signature cards, treasury workstation letters, bank portal access instructions, bank account summaries and contact details.
Once the transaction closes, treasury collects the pre-close checklist and goes after any information that is missing, Tse says. Once accounts are locked down and balances mobilized, Google treasury can proceed to optimize account structures, negotiate lower fees and introduce efficiencies to payments and collections.
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Best-practice benchmark metrics for integrating treasury operations after a deal are 60 to 90 days to gain full control of all bank accounts of the acquired company and nine to 18 months for full operational consolidation, according to Google's research. Google boasts full oversight and approval of funds transfers from Day One, signatory control over all bank accounts within 15 days and complete integration in 60 to 90 days.
Absorbing more than two new companies a month, on average, led Google to develop a step-by-step process with timelines and milestones that start with the agreement and run through deal close to post-close operations. Google adapts the process to the unique features of each acquisition, Tse explains.
Being Google, the company embodied the process in an online tracking application that organizes tasks into a timeline with target dates for each step and displays color-coded status reports to track progress and alert users to approaching deadlines.
Google buys many private companies that never have had to comply with Sarbanes-Oxley or various SEC regulations, so controls need to be put in place quickly once a company is acquired. And because many of Google's acquisitions poured resources into developing technology, not into optimizing their cash flow—and are likely to experience a spike in business and payments once they become part of the Google brand—absorbing them quickly into Google treasury is important, Tse says.
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