From left to right: Gerrit Willem Gramser (AkzoNobel), Laura Koekkoek (Zanders) and Joshua Watts (AkzoNobel).
Artworks (background) by: Wouter Berger and Katinka Lampe, Courtesy AkzoNobel Art Foundation
A spin-off for AkzoNobel’s treasury
Dutch company AkzoNobel is known worldwide for its coatings and specialty chemicals for both industry and consumers. As part of a new strategy to accelerate growth and value creation, the multinational decided to spin off its chemicals division. The challenge was to do this in just eight months.
How did AkzoNobel’s treasury manage to split its activities into two?
With activities in more than 80 countries and 46,000 employees, AkzoNobel has a turnover of around EUR 14 billion. In April 2017, the company decided to change its strategy and transform itself into two high-performing businesses focused on coatings and specialty chemicals. “We needed to embark on a new strategy to build two strong independent companies”, says Gerrit Willem Gramser, head of treasury at AkzoNobel. “This plan had been on our mind some for some time, but was accelerated by market forces.”
Rules of engagement
The announcement to split up the company went out on April 1st, 2017. “We almost immediately started having discussions for treasury on how to digest this”, says Gramser. “In Q1 of 2018 we wanted the company to be completely separated. So, as treasury, we started to do our math backwards. And we realized, given the timelines, it was probably something we couldn’t fully execute ourselves. When you realize that, all other decisions fall into place.”
"We needed full focus on replication, duplication, cleansing – and not transformation"
AkzoNobel’s treasury department had already gone through a bank rationalization and had a fit-for-purpose treasury management system (TMS), in the form of SAP Treasury. “The system was complex, but it fit our needs very well”, says Joshua Watts, treasury infrastructure and project manager during the internal spin-off activities. “With the tight timelines, the first thing we decided as a treasury team, was to determine our so-called ‘rules of engagement’. We needed full focus on replication, duplication, cleansing – and not transformation. The treasury management structure we had was a strong solution. We’re going to continue working as one team and apply strict strategic discipline to meet our deadlines. That was our starting point.”
Treasury setting the scene
To achieve its aims, AkzoNobel required more resources than were available internally. “We were cautious about the deadlines”, says Watts. “The infrastructure we had was built, to a large extent, with the continued support of Zanders. We already had a long-running partnership, so we said: this is where we want to go – can you support us? By the end of June we had started and according to the planning, which was aligned between AkzoNobel and Zanders, we should have the system up and running by the first of January 2018.”
Gerrit Willem Gramser
AkzoNobel also built up a cross-business project management office (PMO) to manage the separation from a group level, for all functions. The governance for the project consisted of the central PMO and expert-separation teams for treasury, tax, HR, commercial, accounting and other functions. “Beneath that we had local separation teams to deal with the local issues”, says Gramser. “We aligned ourselves as treasury in that expert-separation team in which the separation of our cash management and treasury technology were our primary deliverables. It was a layer of projects with a portfolio management on top of it. In the end, that structure worked very well. We started very early, so instead of watching how the rest of the company would approach the separation, we immediately formulated a plan. Quite deliberately we made choices in the beginning of the process – from a timeline and resources perspective – and that was crucial.”
Cloning the bank relations
Treasury could therefore make a single point decision, both on the cash management issues and on the system. Gramser explains: “Then we could really see the efficiency of our model, so we copied and applied it for all the things we did. From a legal perspective that wasn’t possible in all areas – some regulation and documentation was over seven years old. But with our banks we wanted to ‘clone’ our relationship, with the same product, the same services. We could keep the bank relations as they were, which made the discussions with the bank fruitful and fast too. Therefore, they were able to help us with the separation quickly. From a cash management perspective, in the end we were able to depart with all the banks, and all banks went live in line with our original planning.”
From a systems point of view, the SAP Treasury system was cloned and the set-up was adjusted to fit the new bank account landscape. Watts says: “The system was already built for purpose and, as such, we had a good starting point for both companies.”
During the project, the main challenge was to align the cash management stream and technology stream. The idea to clone the system and not to build a new environment and cash management structure was therefore an important decision, says Zanders consultant Laura Koekkoek. “Apart from timelines, the challenge in this project was to set up the new environment technically, with the right master data.”
Decisions needed to be made regarding which entities belong to the coatings business and which to the chemicals business. Some entities needed to be split and it took time to arrange these new legal entities. For the integration at the end and to test the new solution, the bank accounts also needed to be ready, as well as the banking infrastructure. Koekkoek adds: “But at the end, all bank accounts were open, with all legal documentation in place.”
"Everything is so integrated; you can’t start on one area without knowing the status of the other"
That was an achievement, according to Watts. “Everything is so integrated; you can’t start on one area without knowing the status of the other. The complexity is that – apart from all of the individual legal entity or bank account issues – there are so many interdependencies. You can’t approach the TMS separately from your global cash management activities. At a certain point we put a lot of energy into the so-called long tail of the separation. Small entities or small branches, that are havinghave a small impact on the overall figures, were consuming a significant amount of project resource time. So at a certain stage we changed the priorities to the bigger impact issues.”
Across AkzoNobel, the vast majority of the teams were already allocated to the specific business units, so fully separated. Both parts are and remain active in the current global markets. Gramser notes: “The two separated businesses are both good businesses, but they have different futures. And that will be the same for the treasury environment. But starting from now, the businesses can run very well on what we’ve given them.”
In March 2018, AkzoNobel announced the sale of its specialty chemicals part to The Carlyle Group and GIC. “Irrespective of the new owner’s system, our function was to be ready, no matter what scenario. That has been successful, with treasury being an early mover, having a clear plan and sticking to these rules of engagement. We’ve been quite brutal in protecting our own boundaries and guidance. The ‘as-is principle’ was leading: this is what you get. Treasury is an integrated, global operational function.”
"The two separated businesses are both good businesses, but they have different futures"
According to Watts, the project’s success was a real team effort: “The interaction was great, on all levels. Compared to the more generic technology consultants, Zanders is much more strategic in its advice. We understand each other’s language and our teams were quite impressed by the efficiency of the work. There was good integration, good communication. It was on time, on budget – we’re very pleased.”