Estimate Timeline for post-acquisition Banking Integration in a PE-Backed Business
It’s hardly groundbreaking to recommend that banking be treated as a priority deliverable for a business integration. Any Finance Director or Controller worth their salt will want and expect access to the bank accounts as soon as possible…..but it may not be as expedient as everyone hopes, owing mainly to the banking provider processes.
Here is the step-by-step with rough estimation on phases and timelines.
Due Diligence
Tasks: List all bank accounts, including checking, savings, and any other financial accounts. Check for any clauses related to bank accounts in existing contracts and agreements.
2 to 8 weeks.
Deal Completion & Internal preparation for bank changes
Tasks:
Prepare board resolutions for both the acquiring and target companies, authorizing the transfer of control over the bank accounts.
Obtain approval from the board of directors of both companies.
Determine who will be the new authorized signatories for the bank accounts.
Changes to authorized signatories on bank accounts will likely need approval from the PE fund, adding another step to the process. The PE fund may have specific documentation requirements for signatory changes, which can include additional forms and verification steps.
Gather necessary documents such as KYC forms, identification, proof of address, and board resolutions for the new signatories.
Depending on the structure of the PE fund, approvals may be needed from various investors or limited partners.
Provide the bank with the updated list of signatories and required documentation.
DEPENDENCIES: Board members need to be available for scheduling board meetings. PE Fund processes may also need to be followed, determining the timeline.
1-2 weeks.
Coordination with Banking Provider
Tasks:
Establish relationship with baking partner (name and contact details of account manager etc.)
Inform the banks about the acquisition and the upcoming changes.
Arrange meetings with bank representatives to discuss the transition process and clarify any additional requirements or steps needed from the bank’s side to facilitate the transfer.
The bank will outline their KYC requirements for the new signatories and any changes in account ownership.
2-4 weeks.
KYC (Know Your Customer) checking process
Tasks:
Get KYC forms.
Collate info needed for KYC submission.
Submit the necessary KYC documents, which may include identification, proof of address, and other relevant information for the new signatories and any beneficial owners.
The bank will verify the submitted documents to ensure compliance with regulatory requirements.
CONSTRAINTS: You we totally in the hands of the banking processes, and these are regulatory processes, so are unlikely to be expedited just because you want them to go faster. KYC is a crucial step to ensure that the bank complies with anti-money laundering (AML) regulations and verifies the identity of the new account holders so the banks will do everything in their power here to verify that they are operating within the law.
RISKS: Highest risk part of the delivery timeline. I have known banks request information from investors that the investing party is unwilling to provide; resolution of these misaligned expectations can take some time and effort.
4-16 weeks.
Set up online banking
Tasks:
Submit the necessary documentation, including identification, proof of address, and authorization forms for the new users.
Define the roles and permissions for each user based on their responsibilities and access levels.
The bank will create online banking accounts for the new signatories.
Set up two-factor authentication for added security.
Provide training sessions for the new users to familiarize them with the online banking platform and its features.
1-2 weeks
Issue Cards & Readers
Tasks:
Determine cards and reader needs (e.g., for point-of-sale systems or online banking).
Submit a request to the bank for new debit or credit cards for the authorized signatories; submit a request to the bank or card reader provider for the necessary devices.
The bank will produce the cards (which may include customizations such as company branding or specific card limits). The bank or provider may pre-configure the card readers with the necessary settings and security features.
The bank will ship the cards and readers to the designated addresses.
Activate card
Install and set up the card readers, including any necessary software or hardware connections.
Conduct test transactions to verify that the cards and readers are functioning correctly.
1-2 weeks
MILESTONE ACHIEVED: Banking completed
TOTAL ESTIMATED TIME (min-max)
11 weeks
(barest minimum, very optimistic, fairly unlikely)
up to
45 weeks
(unlucky to take this long, but not unheard of)
Key Participants and Their Roles
Chief Financial Officer (CFO) - Provides overall oversight of the financial integration process. Approves key decisions related to bank account integration and signatory changes. Coordinates with other executives and stakeholders to ensure alignment.
Treasury or Finance Team - Manages the day-to-day operations of the bank accounts. Prepares and submits necessary documentation for account changes. Acts as the primary point of contact with the banks.
Legal Team - Reviews and prepares legal documents, including board resolutions and signatory changes. Examines existing contracts for any clauses related to bank accounts.
Board of Directors - Provides formal approval for the transfer of control over bank accounts. Issues board resolutions authorizing the changes.
Private Equity Fund Representatives (if applicable) - Approves changes in bank account control and signatory updates. Coordinates with the acquiring company to ensure compliance with investment agreements.
Bank Relationship Manager - Facilitates the transition process and ensures all bank requirements are met. Provides support and guidance on documentation and procedural requirements. Arranges and participates in meetings to discuss the integration process.
IT and Security Teams - Provides technical support for online banking setup and card reader installations.
New Authorized Signatories - Provides necessary identification and documentation for KYC and signatory updates. Participates in training for online banking and account management.
Know Your Customer
Here are some factors that influence the timeline:
Individual vs. Corporate: Verifying individual accounts is usually quicker than corporate accounts, which may require more extensive documentation and checks.
Risk Level: High-risk customers or those requiring enhanced due diligence (EDD) may take longer to verify.
Completeness and Accuracy: If all required documents are provided accurately and promptly, the process is faster.
Bank’s Internal Processes: Banks with automated KYC processes can complete verifications more quickly than those relying on manual checks. The current workload and available resources at the bank can also impact the speed of the process.
Regulatory Requirements: Different countries and industries have varying regulatory requirements, which can affect the duration of the KYC process.