Treasury Practice

Problem Solved: Dennis C. Bucek, Coherent

Published: Oct 2006

Coherent has operations in several European countries, including manufacturing locations in Finland, Germany and the UK and sales and service offices in Belgium, France, Italy and the Netherlands. The company also has significant operations in the Asia-Pacific region, particularly in Japan, which accounts for over a fifth of its global sales.

Dennis C. Bucek

Senior Vice President and Treasurer

Coherent is a US-based multinational specialising in photonics. The company has production and research facilities in Europe and North America, and sales and service locations in Asia. Coherent’s products include everything from discrete laser systems and components to complete laser measurement and control products. The company employs some 2,300 people throughout the world and posted sales of just over $500m in 2005.


In spite of its large global reach, Coherent operates a very small treasury function, based in Santa Clara, California. The majority of Coherent’s European routine treasury activities are outsourced to an independent treasury service provider (FTI) based in Dublin, Ireland. The outsource service provider runs Coherent’s cash balancing functions, oversees its cash pooling arrangements and takes care of its foreign exchange hedging.

Although the majority of Coherent’s day-to-day treasury activities are carried out by its outsource service provider, it was felt that a more centralised approach would be beneficial, particularly in Europe. The company had struggled to maintain control over the balances of its subsidiaries’ bank accounts. Coherent’s Senior Vice President and Treasurer, Dennis C. Bucek, explains: “You almost had to go ‘hat in hand’ and beg the controllers to send you cash. The desire was to have a similar type of structure in Europe to that which we had in the United States, to make sure that we had better control over the cash.”


Coherent felt that there were significant benefits to be achieved by implementing some form of automated cash pooling arrangement. The decision was taken to implement a series of cross-border, zero balancing cash pools – denominated in euro, sterling and US dollar – for the company’s European operations. The day-to-day activities of the cash pools would be overseen by Coherent’s outsource service provider and Coherent selected Commerzbank as the bank provider on the back of an extensive review process.

An overlay account structure is in place for the UK-based operations. Coherent’s outsource service provider uses the bank’s web-based electronic banking tool to maintain visibility over balances of all the accounts in the pools, updating Coherent treasury on a weekly basis. All positive account balances are swept into the header accounts, with cash being redistributed to the various subsidiaries’ accounts as required. “The subsidiaries, regardless of whether they are a sales office or a manufacturing location, have to request, on a weekly basis, what they need to meet their obligations,” explains Bucek. “That amount of cash is then transferred back to them.”

The company’s primary motivation for selecting the bank was a history of good banking relationships. “We’d had a long standing relationship with Commerzbank,” says Bucek. “They had been our banker since 1972, when we first set up a sales office in Germany. I wanted to build that relationship and that’s really where the decision lay.” However, the quality of the service on offer was also important. “If we didn’t think that Commerzbank had a good and viable solution then we would have gone elsewhere.”

Coherent implemented the cash pooling structure across all its operations simultaneously, a process which took some nine months to implement fully. The controller of the company’s Dieburg, Germany operations managed the implementation process, including opening all the accounts. The setting up of the cash pool was fairly straightforward, with no major hurdles to be overcome. According to Bucek, “The biggest issue was just all the documentation that was required.”

The implementation of the European cash pools has enabled Coherent treasury to gain a much greater degree of control over the cash balances of the subsidiaries. In addition, all invoices are generated from a single, central location, whilst all collections are also overseen and processed at a central location. “I think that this really satisfied senior management’s desire to have a structure in Europe that was similar to what we have in the United States,” says Bucek.

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