Mergers are complicated. When Henkel, a German home and personal care conglomerate, bought National Starch in 2008, finance executives faced the simultaneous challenges of integrating two separate treasuries while maintaining speedy collections for their combined customers.
"When we acquired National Starch businesses, it doubled the size of Henkel's adhesives business in the region," said Ben Ho, vice-president of finance and controlling for Asia Pacific at Henkel. "Henkel and National Starch had different ERP [enterprise resource planning] platforms and different banking relationships so our cash management was pretty scattered around and not coordinated. That's why after the acquisition we saw the need to become more standardised, optimised and efficient."
Dusseldorf-based Henkel's £2.7 billion ($4.3 billion) acquisition of US-based National Starch's adhesives and electronic materials businesses in June 2008 increased its Asia-Pacific revenues as a percentage of global income by half, to 12% from 8%, according to a company statement. No small increase considering the company posted revenues from the region of €1.1 billion ($1.5 billion) in 2007.
"Because the majority of the [National Starch] acquisition was largely in Asia, we have put a lot of resources into speeding up the implementation of the solution," Ho added.
Shanghai-based Ho has worked at Henkel in various finance roles since 2002, including chief financial officer of its Thailand subsidiary and as Asia-Pacific regional controller. Supported by a staff of 300 across 12 countries, he is currently responsible for all of the company's regional finance activities, including collections, reporting, tax, treasury and its shared sales service centre in Manila.
When it came to improving Henkel's Asian cash management, Ho and his team selected a standardised regional treasury solution from Deutsche Bank that allowed the company to establish common operating accounts throughout Asia-Pacific and standardise the high volume of customer payables and receivables.
Customer oriented treasury
"We decided that by centralising [our cash management] with one bank and one solution we would improve our operational efficiency and customer service," said Ho. He and his team selected Deutsche's solution in February 2009 and began implementation in April 2009.
The bank's solution involved consolidating payables, receivables and liquidity management for all of Henkel's legacy and National Starch businesses into in-country and regional structures with the bank. This included local account opening and integration with the financial institution's db-direct internet platform. The company continues to work with other financial institutions but only in a few "select markets" according to Ho.
A consolidated treasury saved Henkel money. Immediately following the merger, the company had as many as 400 bank accounts with multiple financial institutions, but with the solution Ho said it reduced the number of accounts by at least a hundred and "substantially reduced" operating costs.
"The finance staff works much faster and, on the customer side, we've been able to speed up the sales process," he said. "Our customers and sales people have noticed this difference."
The benefit to customers was something Ho mentioned repeatedly. "In the past, sometimes we would need to hold up an order to reconcile who the cash payments coming in were from before we could release the goods. But now, because each customer has its own bank account with us, we can easily see who is paying and immediately release the goods."
With the Deutsche solution, Henkel can issue each customer a payer ID, essentially a bank account with the company, for their payments. Upon receipt of a payment, the company's ERP system automatically reconciles and approves the order for shipment.
"The solution improves the time for us to release their order and speed up the sales cycle," said Ho. "We can focus more on the customer and deliver better service."
To date, the payer ID has only been rolled out to customers in China, Hong Kong and Singapore and Ho acknowledged that his job would not be done until Henkel is using it region-wide. He estimated this would be finished by the end of the year.
Ho said he would recommend this system to companies looking for a more "cost-efficient [cash management] solution and a more efficient collections process". He said these could include other multinational companies selling consumer goods across the region.
Multinational companies similar to Henkel with region-wide cash management needs include Thailand-based regional paper manufacturer Advance Agro (Double A paper) or ubiquitous names such as Anheuser-Busch and Unilever.
This story was first published in the April 2010 issue of FinanceAsia magazine.