Mergers and acquisitions rely on the right market conditions, but they are also contingent upon the timing and synergies of the parties involved. Experts and businesses alike are keeping an eye on the M&A environment—with many anticipating more favorable conditions in 2025. As companies look to merge, acquire or sell, it’s a good time to review how to best optimize joint operations.

There are things to consider when merging two companies, including the benefits created by joining two workforces with distinct synergies. As part of that, it’s also important to evaluate how two entities would best operate once combined.

Evaluate expenses and combined cash generation for short-term working capital needs

One of the best strategies for improving business cash flow is to develop a forecasting model and method that works for the business. To predict the amount of income it will have over the course of the year, it’s important to understand the ebbs and flows of the company’s purchase journey and the changes in the market that may impact customer choices—particularly how they would affect the newly combined business. If the forecast consistently puts the company in a tight spot financially, dedicate some time to review processes and numbers with your banker.

Identify and optimize working capital optimization strategies

Cash flow

Building a cash flow optimization plan starts with an understanding of business operations and goals—and their timeframes. Business expenses can be broken into four segments: operating, reserve, strategic and restricted. Sometimes, there is not enough cash on hand to readily cover large expenses or new business opportunities. That’s when evaluating lending options as part of your liquidity strategy comes into play. With interest rates being impossible to predict, it can be difficult to choose the right loan option, so model how each will impact your short- and long-term goals. Options our clients have had success with include term loans, working capital lines of credit, and swaps‡, which can be lucrative if companies want to lock in interest savings based on the yield curve.

Accounts Receivable and Accounts Payable

Another important process to sync up when completing a merger or acquisition is the approach to AR and AP turn days. How quickly are you paying your bills, and what are your terms for being paid? Identifying and optimizing payment turn days has a direct impact on working capital and reserves, so ensuring both companies align here is critical.

Credit cards

Virtual payment programs are an increasingly important piece of a successful working capital plan, as they can create efficiencies while freeing up cash and managing expenses. Integrating them into your cash management strategy can help by:

  • Increasing flexibility through the float period between credit card purchase and payment
  • Improving spending power with higher limits
  • Using cash rebates to reinvest into the business or to fund expenses

While all these strategies offer ways to optimize capital, the best plan is one that uses a multi-pronged approach that incorporates the right mix for your business and goals.

Focus on security and limiting fraud

Fraud is—and will continue to be—a top concern for businesses of all sizes. Fraud targeting businesses has become even more sophisticated, making it extremely difficult to spot. It’s no longer as simple as looking for a misspelling or a typo in a subject line; schemes look more legitimate, only increasing the importance of implementing a set of checks and balances from the outset of the merger or acquisition.

Incorporate integrated payables: In addition to offering a multi-payment AP strategy to maximize output, integrated payables significantly reduces the risk of payment fraud as a result of account takeover, intercepted payments, business email compromise and other schemes. Automating and incorporating all payment types, including virtual card, into one payment solution streamlines the entire AP process while also improving security.

As financial fraud continues to evolve, the best way for businesses to protect assets is to have a strong relationship with a dedicated banker. A bank’s treasury management department works to advise clients on ways to strategically administer their cash flow options and large financial decisions, and that includes actively managing potential fraud risks.

Maximize your banking relationship

During uncertain market conditions and varying demand for M&A, regularly assessing your business and asking tough questions are crucial to long-term success. Your banker should serve as a consultant and sounding board who knows your business, challenges and goals inside and out—the way UMB has always served our customers.

If you are interested in learning more about how UMB can help your business, visit our website.

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