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A CASE STUDY
TSA Management for US Private Equity Company.
Transitional Services Agreement | Multi-Country Acquisition | Carve Out
A US Private Equity Firm had recently undertaken a Carve out of a European-based business in the Media Intelligence space. The acquisition was multi-country, spanning 6 European territories with a Transitional Services Agreement (TSA) in place for Year 1.
By their nature, TSA Arrangements require careful navigation to ensure Buyer and Vendor teams, cultures and jurisdictions are transitioned both effectively and efficiently. A fundamental in this is the smooth transition of the core Finance Function.
Amesto Global came on board for 12 months to help close the gaps and provide the support needed to navigate this complicated acquisition. We played a pivotal role in providing the 'Glue' to a respectful and successful Finance transition, at all times aligning the differing requirements and objectives of both parties to the TSA.
Planning & Design
To start, we established a Governance Structure approved by stakeholders to ensure standards were set and procedures were followed. This structure created a framework to help build strong relationships and communication between the different countries and various entities. Having strong lines of communication and working relationships was key to this successful TSA arrangement.
Implementation: TSA Management
When we came on board, we discovered that due to miscommunication between the acquired territories and The Company during the transition, the day-to-day finance and accounting processes were not being performed the same way. This created a chaotic working environment and many financial reporting problems. We implemented the following deliverables to streamline operations.
Cashflow Forecasting Model.
Problem: Each country prepared cashflow statements in a different way, leaving it extremely difficult to track the movement of cash.
Solution: We built a Consolidated Cashflow Forecasting Model, asking each entity to provide a 13-week cashflow projection. This allowed all entities to be coordinated under a single unified document with a clearer prediction of future funds. We then updated the CFO and Controller regularly if any issues came up.
Master Tax & Compliance Trackers.
Problem: Due to all of the acquisitions, no formal compliance measures had been established. This was also leading an unorganized working environment.
Solution: We created a comprehensive Tax and Compliance Tracker to act as the framework, with each country having access. This tracker outlined responsibilities & due dates, keeping everyone accountable and on the same page.
Problem: During initial Due Diligence, The Company estimated that no inter-company transactions would exist at year end. However, at the time of the acquisition, the The Company had a large balance.
Without any uniform processes in place, each entity had their own way of handling transactions, leading to major problems and miscommunication.
Solution: We assisted with the outstanding intercompany loans and trading balances clean-up process, consolidating everything within one month.
The TSA Manager worked with each country, creating a Summary Schedule to help pay-off loans and analyze cash. The Intercompany Reconciliation is now streamlined across all entities.
Debtors Tracking & Aging
Problem: One of the acquired entities had numerous customers with significant balances outstanding for more than 90 days.
Solution: We worked with in-country teams to develop an effective plan to collect aged receivables as "Cash is King" in new acqisitions. We compiled a strong team of credit collection individuals, held weekly meetings and communicated incentives to make changes to the team.
Since implementing the plan, the balance has improved significantly.