IAC has implemented a multi-entity, multi-currency notional pool that has delivered tremendous benefits and helped the company meet its aggressive growth strategy around the world.
Photo of David Lally, IAC/InterActiveCorp.
IAC is an American holding company that owns over 150 brands across 100 countries, mostly in media and internet, with its headquarters in New York City.
Multi-entity, multi-currency notional pool brings multiple benefits for IAC
On 1st May 2017, IAC, a leading media and internet company, announced it had entered into a definitive agreement to combine IAC’s HomeAdvisor business and Angie’s List into a new publicly-traded company to be called ANGI Homeservices Inc.
In preparation for this complex transaction, IAC set several critical cash management objectives for its HomeAdvisor business in EMEA. First, IAC needed to repay/refinance all cross-segment indebtedness between HomeAdvisor and IAC’s other subsidiaries. Prior to the merger activity, it was also necessary to reduce HomeAdvisor’s cash balances in order to reduce leakage to IAC shareholders. Additionally, IAC’s treasury team had to find a way to manage liquidity more efficiently without the need for frequent distributions, contributions and/or intercompany loans, while reducing foreign exchange exposure and cost.
The overall mission was to increase treasury efficiency and improve the ability to fund growing operations and expansion plans within EMEA. All of this had to be accomplished within an exceedingly short timeframe, increasing the challenge for the team. To accomplish its goals, IAC also needed to consolidate disparate banking relationships into a single banking provider to gain greater visibility and control.
In order to achieve its stated goals, IAC engaged multiple internal stakeholder groups, including treasury, legal, financial controllers, tax and accounting, to formulate a viable solution across eight different entities and management teams, and 16 accounts.
The stakeholder group tackled critical questions, such as how to meet the short-term objective of restructuring the loans while minimising cash balances, and how to set up the best structure for future growth at the lowest cost.
Following engagement and dialogue with the banking team, IAC decided to move forward with a unique multi-entity, multi-currency notional pool in Luxembourg from J.P. Morgan. The pool would be linked to in-country operating accounts in the UK, France, and the Netherlands on a single-bank platform.
From start to finish, the project was completed in less than three months. The structure enabled IAC to realise all of the objectives it set. This included the efficient restructuring of businesses, reducing cash balances and, prospectively, improving liquidity management through currency consolidation by way of notional pooling across multiple legal entities and currency positions. At the same time, this ambitious initiative delivers real-time visibility into cash positions, as well as increased control and critically important cost efficiencies.
Best practice and innovation
Since implementing the multi-entity, multi-currency notional pool, IAC has seen tremendous benefits. As a result of this initiative, the company has minimised the amount of cash sent offshore, as well as that left behind which was part of the restructuring in the lead up to the merger. The pool has allowed IAC to achieve maximum value for all of its operating cash.
In addition, they have enhanced treasury efficiency by eliminating the need for day-to-day management of fragmented currency balances. IAC has achieved efficient cash management without the need to create FX. Importantly, treasury now has real-time visibility and control of all European cash through a single bank platform, which is a game-changing improvement.
Hosting the cash pool with the bank enabled IAC to establish a long-term and stable liquidity structure within the European Union, in view of the evolving market situation.
Overall, this initiative is an example of best practice that highlights the innovative thinking of all the IAC stakeholders involved. Helping the company meet its aggressive growth strategy around the world.
Minimised cash offshore.
Achieved maximum value on operating cash.
Enhanced treasury efficiency.
Real-time visibility and control.
Senior Vice President, Treasurer
Nick Stoumpas is the Senior Vice President and Treasurer where he oversees IAC’s capital markets, treasury and insurance functions. Prior to joining IAC, he occupied various financial positions within Viacom, Estee Lauder, Degussa Corporation and Bankers Trust Company. Nick holds an MBA from New York University and a BA from Temple University.