Do you lie awake at night wondering how to improve visibility over your company’s cash? Or spend the commute home thinking of better ways to consolidate your banking activity, while managing your counterparty risk exposures? Then you are not alone. Across the globe, corporate treasurers, and in particular those in charge of multinational operations, share very similar concerns.
In fact, there are four key challenges driving the cash and risk agenda for such treasurers today:
These were precisely the concerns that Live Nation found itself facing. With new acquisitions adding even more complexity to the company’s bank account structure, the treasury team, led by Bill Lowe, SVP Treasurer, and Nadia Large, Senior Director, Treasury, decided it was time to globalise, electronify, centralise and pro-actively manage the company’s high-cost, paper-based and decentralised treasury operation. Here’s how they managed it:
Cash transparency, bank consolidation and counterparty risk take centre stage
As the world’s largest live entertainment company, Live Nation Entertainment connected 200m fans to 200,000 events in 41 countries in 2011. The company produces more concerts (22,000), sells more tickets (141m/$8 billion), manages more artists (250 including U2, Madonna, and Lady Gaga) than any of its peers. Live Nation also owns/operates 133 marquee venues and operates the fifth largest e-commerce website globally, attracting 27m unique monthly visitors.
The treasury team at Live Nation, consisting of Bill and Nadia, two SSC colleagues in Houston and an associate in London, was tasked with the significant challenge of integrating cash management processes for the company’s acquired entities. Acquisitions included Ticketmaster (2010), Front Line (2011), leading ticketing companies in France and Spain (2011), plus new ventures in Australia, Korea and Japan (2012). While these acquisitions had brought significant market share benefits for the company, behind the scenes, things were becoming increasingly complex for treasury.
In fact, 400 new bank accounts (200 US and 200 international) were added as a result of the company’s investments, and yet there was no expansion of treasury staff. This left Bill and Nadia in charge of over 700 bank accounts across 60+ banks in the US, and over 400 accounts across 50+ banks mostly in Europe. On top of the bank account challenge, there were hurdles such as new currency requirements, varying enterprise systems to integrate, and of course a reluctance to change mentality enhanced by local language preferences.
“We didn’t have visibility of cash, other than at month end, when balances were reported,” explains Bill. As a result of this lack of effective cash transparency, the company was faced with significant counterparty risk concerns. And when you are looking after $1.2 billion of global cash, $700m of which belongs to artists and clients, minimising counterparty risk is an absolute priority. “With the economic turmoil in Europe,” adds Bill, “we needed to be able to have full visibility and the agility to move cash as required.”
We knew that we needed to vastly improve our technology and install a portal that would not only cover cash management but also FX for example, whilst helping us to achieve real-time visibility.
Ensuring liquidity was another priority for the treasury team as Live Nation has significant seasonal and quarterly cash swings up to and around $500m. While every effort was being made by the treasury team to keep up with these demands, existing processes were not cost effective, and proved inadequate in meeting the company’s growth goals, which are primarily achieved through acquisition. “We knew that we needed to vastly improve our technology and install a portal that would not only cover cash management but also FX for example, whilst helping us to achieve real-time visibility.”
So, an ambitious enterprise-wide initiative began with the aim of meeting the company’s strategic goals by better managing cash, FX, banking, credit card processing, inter-company funding, third-party debt financing, letters of credit, and vault services requirements in multiple countries that increase in number each year. The initiative was also designed to successfully integrate newly acquired companies and provide treasury services to meet the needs of a diverse group of clients, such as venues, artists, ticketing companies, and international development projects.
An essential component of this was the installation of an integrated cash and risk platform. Desirable attributes for the solution included:
So that the small treasury team could still work effectively when travelling to see overseas affiliates.
“I’m not a naturally tech savvy person,” admits Bill. “But given that I need to make authorisations and entitlements and so on via the system, we absolutely needed something that would be easy to use. It was also important that the platform be very user friendly in order to minimise any onboarding concerns that our affiliates might have.”
With operations across multiple continents and time zones, being able to address any concerns in the local language was also key.
Says Bill: “On top of this, we wanted a counterparty that was strong, reliable and that would grow with us as we expand our business. We put a bid out to five banks in Europe, all of whom we considered from the start to be strong competitors.”
“We started the project in July 2011, with the RFP process, and in September 2011 we selected J.P. Morgan after two rounds of bids. The bank provided not only a competitive bid but also an extremely professional relationship team, and they actually listened to what we were asking for! Our RFP outlined the goals and objectives and the proposal from J.P. Morgan met each and every one of those. In fact, when we began implementing J.P. Morgan ACCESS™, we actually found that we surpassed those in many ways.”
The implementation phase
While Live Nation’s treasury team was largely responsible for the enterprise-wide initiative to implement an integrated global cash and risk management platform, numerous internal and external groups were instrumental in the success of the project. Naturally this included all the participating affiliates in western Europe, and Scandinavia.
One of the toughest things was moving the local operations away from bricks and mortar banking.
“We’ve grown by acquisition and our affiliates therefore have their own bank relationships, their own accounting systems for example and really, their own way of doing things. In order to convince regional business leaders of the merits of migrating to electronic banking and the importance of centralising banking processes, we had to engage in multiple communications efforts. We began with presentations to secure buy-in from regional business and finance leaders for example and were very open with sharing information around progress, cost savings and so on.”
“One of the toughest things though was moving the local operations away from bricks and mortar banking. Most affiliates were very used to having face-to-face relationships. However, some of the newly acquired companies were already operating with banking systems in place, which were running smoothly and efficiently. In this instance, it was a question of conveying the importance of a standard solution for transparency, for cost efficiencies and effective management of financial risks. The consolidation of bank relationships also caused some friction as some of the companies were reluctant to sever long-standing bank relationships.”
To assist with this significant shift, J.P. Morgan travelled with Nadia to the different countries in which the company has operations to help educate and onboard affiliates. “J.P. Morgan’s implementation team also prepared all the necessary onboarding documentation for us and that was a big relief, given that there are only two of us in the treasury team here,” says Nadia.
“It is worth noting that some of the affiliates who we thought might be reluctant to change actually adopted the solution wholeheartedly right from the start, which is a good reflection on the team from J.P. Morgan and their level of service and expertise,” adds Bill.
Additional stakeholders that the solution needed to cater for were accounting, tax, legal, and IT. Oracle files are now uploaded for payments with statements available online for timely reconciliation and closing. Cash management practices have been harmonised with local laws, know-your-customer rules and tax regulations. “We are also now better placed to see what our affiliates’ needs are on a daily basis, to understand their unique challenges and requirements and develop more effective and timely solutions.”
Live Nation will close 125 European accounts by the end of 2012. The simplified banking structure will enable the company to address corporate cash needs more effectively and protect liquid assets during a period of regional turmoil. In parallel, the company has enjoyed an improvement in cash and payment related services to its performing artists and stakeholders.
Indeed, through the rollout of J.P. Morgan ACCESS™, the company has been able to lower its counterparty risk exposures, minimise costs and improve cash transparency using pooling and an automated inter-company loan system across Europe. Treasury has also centralised LCs and facilitated their timely issuance, renewal and modification. “Online reconciliation and statements allow accountants to close books faster and outside auditors no longer hold quarterly statements hostage to confirming letters,” adds Bill. “Elsewhere, by combining Brink’s vault service with banking partner programmes, venues have been empowered to improve safety, lower fraud risks and directly manage when and how much cash to deliver and pickup,” Bill explains.
The new processes also mean that operating staff can take control of their payments by setting up ACH or wire payments for more timely release by treasury. Additional benefits of centralisation include improved administration of internal Sarbanes-Oxley processes for investing cash, operating bank accounts, initiating and renewing LCs, managing FX, and providing credit card merchant IDs linked to bank accounts.
And the ability of the platform to grow as Live Nation expands organically, or by acquiring new companies around the world, is key to the success of the project. “We’ve achieved all the goals we wanted to with the platform in the ten western Europe and Scandinavian countries where it is now live and we’re looking forward to expanding it to Asia and possibly replacing one of our two operating banks in the US,” says Bill.
So what is it about ACCESS™ that made the European project such a success for Live Nation?
J.P. Morgan ACCESS™ Liquidity Solutions is designed to be ‘your window into your global, regional and local liquidity positions’ by providing greater insight — for more informed decision-making. For example, through J.P. Morgan ACCESS™ Liquidity Solutions, you can:
“J.P. Morgan has really gone the extra mile and we would definitely not be in the position we are today without that support or the ACCESS™ solution,” says Bill.
Global Product Executive for Liquidity at J.P. Morgan, Phil Lindow was pleased at Live Nation’s reaction to ACCESS™ Liquidity Solutions. “We have recently completed the international roll-out of a new platform supporting a powerful range of liquidity tools, all brought to the end user via J.P. Morgan ACCESS™. ACCESS puts treasury teams in full control of transaction flows at a granular level, but also helps them create and administer global liquidity structures at a strategic level. The tool is designed to ease the administrative burden of complex, evolving corporate structures with multiple bank relationships. Live Nation’s case truly demonstrates the effective control a small team can maintain over a multi-faceted, dynamic global business”.