Strong banking relationship helps Invista deliver successful spin-off
The challenge
Since its acquisition by Koch Industries in 2004, Invista aimed to have a best in class treasury operation. It implemented notional pooling underpinned by physical cash concentration, as part of a wider business process re-engineering programme, backed by a rollout of SAP across the group. Today, SAP is integrated with Invista’s City Financials treasury management system (TMS), which is itself closely integrated with Bank of America Merrill Lynch (BofAML) in several territories around the globe through host-to-host connections.
Having a 15-year relationship with your bank can bring serious benefits when there is treasury heavy lifting to be done. For Global Treasury Director and Risk Leader, Scott Swindler and the treasury team at Invista, it was their consistent, assiduous approach to their relationship with BofAML that helped steer them through the spin-off of a significant part of the business to a new entity.
The US$2bn sale of the company’s apparel business to China’s Shandong Ruyi Group – code-named ‘Project Eagle’ – was just the latest example of a close working relationship that has seen Invista call on BofAML to build one of the most sophisticated treasury set-ups anywhere in the world.
The solution
Project Eagle was a showcase for the benefits of a longstanding close cooperation between Invista’s treasury team and bank. Invista came to BofAML very early in the process and the two worked together to make sure preparations for the spin-off were as thorough as possible.
Specifically:
- Accounts were segregated and a separate instance of BofAML’s CashPro platform was brought online for the soon-to-be-sold businesses.
- Account signers were updated to make sure that those that would have authority over the spin-off accounts on legal day one had that authority in time to make sure that the risks were mitigated.
- The cash pooling structure was modified to remove those accounts that were in the legacy structure that weren’t going to be in the future.
- Arrangements for on-the-day payments were in place well ahead of time to ensure a smooth handover on 31st January.
Best practice and innovation
For years before the deal, the relationship between Invista and BofAML had been boosted by the Invista treasury team’s awareness and willingness to understand the banks’ KYC requirements around a private company.
The best demonstration of this has been the process behind the sale of the apparel business to Shandong Ruyi, where the links forged over a decade-and-a-half have allowed bank and treasury to work seamlessly together to deliver a successful spin-off which has left both entities in a stronger position for the future.
Key benefits
The long-standing and carefully nurtured relationship between Swindler’s treasury team at Invista and BofAML has given the team an edge when it comes to adopting best practice such as notional pooling and integrating the latest versions of its ERP system.
In January 2019 it was the longstanding strength of that relationship that allowed the apparel sale to go through without a hitch and the spun-off business to have a fully functioning treasury from the moment the deal was signed. Taking this same approach, Invista closed another successful spin-off with Invista Fibres and Resin GmbH on 4th March, closely aligning with their BofAML team in preparation.
Going forward, the close relationship with BofAML is continuing to deliver benefits for Invista as it moves to the next stage in the development of its global treasury, which may well include the establishment of a multi-currency notional pool to further optimise group working capital.
