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Navigating stormy
seas of growth...
seas of growth...
Stress testing a corporate vision for change
A global consumer products company saw a clear path to greater success by charting a bold transformative course. To reposition the company, it was determined that both divestment and acquisition activity would be required. Little did the management team know that the acquisition activity, in particular, would present them with unexpected challenges around process integration, Sarbanes-Oxley (SOX) compliance, and fraud that required help and guidance to overcome.
The concept was impeccable: Spin out one of the parent company's two primary product lines as a separate corporate entity in the U.S. Concurrently, shore up the competitiveness of the new American company through a series of strategic acquisitions to extend the company’s reach in the wholesale/retail supply chain. This would give the now vertically-integrated entity a competitive edge—even over larger rivals in the sector.
The problem was that most of the newly acquired companies lacked the financial sophistication of their multinational parent. Clashes of business process and culture were expected and could be worked through over time. But an issue of urgency loomed: SOX compliance.
Indeed, compliance appeared to be the toughest nut to crack as evidenced by identified control deficiencies. Further, six months into the acquisitions process, a potential fraud was discovered involving one of the acquired companies.
"It was just the perfect storm," said PwC partner Debbie McKibben, "A number of external factors appeared that the company didn’t necessarily have the infrastructure in place to handle. But the acquisition and divestiture plan itself made good business sense as a strategy for the company."
PwC had already been engaged to help standardize business processes across the more than 40 new facilities so that the entire company could upgrade at once to SAP 6.0 . That effort drew PwC into helping with SOX compliance issues.
SOX compliance had carried on and now assumed center stage. With a testing deadline only three weeks away, a PwC team worked around the clock to help develop and implement a multitude of controls. The result: a significant turnaround and robust control environment.
McKibben points out that a major ancillary benefit of this effort was that the client's staff members were not sidelined during SOX remediation and testing. Instead, PwC worked side-by-side with company process owners to define new controls, gain management approval, train key personnel, and test for functionality. This helped transfer important knowledge to the company, empowering its staff for future efforts.
And then there was the divestiture.
Here, financial reporting capabilities and timing became focal points. The multinational parent had previously handled financial reporting from its global headquarters with limited involvement from the American entity. This meant plenty of work ahead for the divestiture team, which needed to prepare new financial statements and fine-tune its business processes for the long term. PwC was there to help.
"That was a lot of rolling up the sleeves and many, many hours from our partners and staff in capital markets, assurance, advisory and tax to help our client achieve success,” recalled McKibben. Financial reports were then filed with the SEC, and PwC began to help the company further strengthen its financial reporting practices and policies.
Today, the company has weathered its perfect storm and has a new sense of how to get ahead of the change curve. “The key in a complicated situation is to bring it down to simple process improvement that’s executable,” said McKibben, “It’s having a good strategy. It’s having good minds to decide how we’re going to attack a problem, and it’s having crystal clear project management. We're proud to have helped our client effect such positive change.”
A global consumer products company saw a clear path to greater success by charting a bold transformative course. To reposition the company, it was determined that both divestment and acquisition activity would be required. Little did the management team know that the acquisition activity, in particular, would present them with unexpected challenges around process integration, Sarbanes-Oxley (SOX) compliance, and fraud that required help and guidance to overcome.
The concept was impeccable: Spin out one of the parent company's two primary product lines as a separate corporate entity in the U.S. Concurrently, shore up the competitiveness of the new American company through a series of strategic acquisitions to extend the company’s reach in the wholesale/retail supply chain. This would give the now vertically-integrated entity a competitive edge—even over larger rivals in the sector.
The problem was that most of the newly acquired companies lacked the financial sophistication of their multinational parent. Clashes of business process and culture were expected and could be worked through over time. But an issue of urgency loomed: SOX compliance.
Indeed, compliance appeared to be the toughest nut to crack as evidenced by identified control deficiencies. Further, six months into the acquisitions process, a potential fraud was discovered involving one of the acquired companies.
"It was just the perfect storm," said PwC partner Debbie McKibben, "A number of external factors appeared that the company didn’t necessarily have the infrastructure in place to handle. But the acquisition and divestiture plan itself made good business sense as a strategy for the company."
PwC had already been engaged to help standardize business processes across the more than 40 new facilities so that the entire company could upgrade at once to SAP 6.0 . That effort drew PwC into helping with SOX compliance issues.
SOX compliance had carried on and now assumed center stage. With a testing deadline only three weeks away, a PwC team worked around the clock to help develop and implement a multitude of controls. The result: a significant turnaround and robust control environment.
McKibben points out that a major ancillary benefit of this effort was that the client's staff members were not sidelined during SOX remediation and testing. Instead, PwC worked side-by-side with company process owners to define new controls, gain management approval, train key personnel, and test for functionality. This helped transfer important knowledge to the company, empowering its staff for future efforts.
And then there was the divestiture.
Here, financial reporting capabilities and timing became focal points. The multinational parent had previously handled financial reporting from its global headquarters with limited involvement from the American entity. This meant plenty of work ahead for the divestiture team, which needed to prepare new financial statements and fine-tune its business processes for the long term. PwC was there to help.
"That was a lot of rolling up the sleeves and many, many hours from our partners and staff in capital markets, assurance, advisory and tax to help our client achieve success,” recalled McKibben. Financial reports were then filed with the SEC, and PwC began to help the company further strengthen its financial reporting practices and policies.
Today, the company has weathered its perfect storm and has a new sense of how to get ahead of the change curve. “The key in a complicated situation is to bring it down to simple process improvement that’s executable,” said McKibben, “It’s having a good strategy. It’s having good minds to decide how we’re going to attack a problem, and it’s having crystal clear project management. We're proud to have helped our client effect such positive change.”
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