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5 Questions to Ask Your Bank Before an M&A Event

From taking an up-close look at your structure and system, to defining your goals and engaging with banks - here's where we think you should start. 

From taking an up-close look at your structure and system, to defining your goals and engaging with banks - here's where we think you should start. 

Originally published by The Global Treasurer on November 10, 2020

Mergers and acquisitions (M&A) can be both exciting and stressful for your treasury organization. These feelings are heightened in the weeks leading up to the deal, as treasury seeks to understand the current state of the target. Treasury must consider the cash management processes in place, impacted personnel, credit and risk policies, and banking operations as the deal closing approaches.

In preparation, the acquiring company’s treasury must be able to rely on its banking partners for support and direction. The banking component can be easily overlooked, so the organizations involved must ensure banking partners are appropriately engaged.

Although not exhaustive, these five questions can spark conversations with your bank that will help you prepare for an M&A event.


1. Who are my bank contacts?

At minimum, treasury should understand its relationship with the new bank’s day-to-day contacts, who include the:

  • Relationship manager, banker or lending officer
  • Treasury management officer
  • Client service representative
  • Know Your Customer (KYC) officer

These individuals will support all deal-related banking activities, including documentation updates, product and service changes, and, in some cases, funds flow execution.


2. How do I change ownership, officers and signers for the impacted accounts?

Your relationship manager and KYC officer can inform you which documents you need to change account ownership. Every bank is different, but you can expect to submit:

  • Documents to verify ownership change
  • An updated banking resolution
  • A signature card if company officers and/or account signers are changing

For any corporate name changes, treasury should be prepared to submit additional documents, such as a name change certificate and W-9 tax form.


3. How do I gain visibility into the accounts I’m acquiring?

It is essential that treasury gains visibility of acquired accounts. This allows your treasury team to understand the historical balances and cash flows, as well as position and forecast cash effectively after close.

If you already have relationships and online portals with the current bank(s), you can add the acquired accounts to your online portal or add yourself as a security administrator on the prior owner’s online portal upon closing.

If you do not have relationships with the current bank(s), request to be entitled to the acquired accounts’ current online portal as a security administrator and perform user entitlements to add the required users to cash reporting. Be sure you understand the existing user privileges and the bank’s requirements to update security administrators.


4. What products and services are impacted?

By understanding the accounts’ current bank products, treasury can identify redundancies and cost-savings opportunities on bank fees.

To learn more about products and services, obtain the account analysis statement for the company or entities you are acquiring. Review the analysis statement with your target company. Ask the target company to invite its banking partner(s), so you can ask them about their fee structure, as well as current products and services. The bank will likely have a confidentiality agreement on file with the current owner, so you should work with the target company to determine what the bank needs to openly share information on the current banking structure and pricing.


5. Is there connectivity for file transmissions with the bank?

By reviewing file transmissions and connectivity, you can identify where opportunities exist to gain efficiency through bank integration.

The process of transitioning existing or establishing new file transmissions for an M&A scenario can be extensive. Make sure you’re aware of all file transmissions and any connectivity established between the current owner and the impacted bank(s), including: 

  • The connectivity method (e.g., host-to-host)
  • File protocols (e.g., secure file transfer protocol)
  • File type (e.g., electronic data interchange)
  • File contents (e.g., ACH payments)
  • Frequency of file transmissions (e.g., daily or weekly)

Compare this information with your current operational setup, then work with your IT group to determine how to consolidate transmissions. The transmissions may need to be maintained via a transition services agreement (TSA). Designed to make the M&A transition smoother, a TSA enables the account’s current owner to provide treasury services for the acquired accounts for a designated period of time, typically six months to a year.

Your banking partner’s responses to these questions should drive conversations that can help you prepare for the upcoming deal. Embrace the opportunity to better understand your target’s banking structure—the sooner you begin asking these questions, the better positioned treasury will be for the journey ahead.

J.P. Morgan’s Corporate Treasury Consulting team can support clients like you as you prepare for and execute a merger or acquisition. Fill out the form below to get in touch with us today to learn how to get started.

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