In October 2012, Nokia announced it had sold Vertu to private equity group EQT for an unspecified amount. As James Koh, Group Treasurer explains, “our luxury mobile phones are now sold in over 50 countries around the globe through our own retail and trade partners. Consequently, we had broad, complex cash and treasury management requirements from the outset, which needed to be managed through an entirely new treasury function, set up from scratch.”
This was a highly complex undertaking as Vertu’s activities had been deeply embedded into the Nokia business, as opposed to being managed through a separate entity. The objective was therefore to establish a full, standalone global treasury operation from scratch within less than six months of the spin-off. The scale and complexity of the undertaking was challenging, with new policies, strategy, cash management, liquidity, financing, foreign exchange (FX), banking, documentation, accounts, transaction and payment structures, processes, technology infrastructure and interface with SAP required. As cards are the primary collection method, often for large amounts, global merchant acquiring was a key priority across their primary locations including China, Asia Pacific, Russia, Middle East, the US and Europe.
Vertu successfully set up an entirely new treasury function from scratch to support the new business in close co-operation with its global partner bank, Bank of America Merrill Lynch. It was soon apparent that the right global banking partner is critical to the success of a project with significant complexity and tight timescales.
As Koh recalls, “we considered multiple banks but found that Bank of America Merrill Lynch had the most appropriate regional and global solutions, customer commitment and strong relationships, and demonstrable understanding of our business requirements.”
Between January and June 2012, the chosen bank and Vertu worked closely together to set up 61 accounts globally, and 15 banking relationships, all of which report through the bank’s electronic banking solution CashPro. The ability to see all their worldwide balances and transfer money between both Bank of America Merrill Lynch and non-Bank of America Merrill Lynch accounts globally (including China) through a single platform is not a capability that is widely available, but has proved extremely valuable. The other major project activity was to set up global merchant card acquiring, which it developed with its bank’s merchant acquiring partner, First Data.
Although the requirements are global in scope, China represents more than 50% of its market, so this was a key location. Again, Vertu worked with its chosen bank and partner banks to implement a global solution, focusing on achieving the maximum efficiency and standardisation possible, bearing in mind diverse regulatory issues in each market. Vertu has a treasury centre in China and opened accounts with its bank’s local partner banks, ICBC, China CITIC and Banco Weng Hang in Macau, in order to comply with local requirements, all of which are accessible through CashPro.
Vertu settle inter-company CNH invoices between China and the UK, in addition to royalties and inter-company loans, in order to achieve efficient repatriation of funds. While China is a complex country in which to do business, it has received excellent advice, and as a relatively small business, it is able to take rapid advantage of new opportunities as liberalisation in China continues. The project included a range of other essential components, including defining new treasury policies and processes across the broad reach of treasury’s activities, setting up a revolving credit facility, cash pooling structure and payment gateway. The company has implemented a global corporate cards programme for both T&E and purchasing, providing centralised visibility and control over expenditure worldwide.
As Koh concludes: “In addition to the tight timescales and scale of the project, it was impossible to determine the full project scope upfront as the activities that would comprise the Vertu business were embedded into the Nokia business and were being carved out on a standalone basis for the first time for spin-off. Together with our bank we therefore needed a highly flexible and responsive approach to project management globally from start to finish to accommodate changes, requirements and developments in the scope and detail of the project.”