The formal merger with Darrell has been negotiated and the legal formalities have been completed.

The formal merger with Darrell has been negotiated and the legal formalities have been completed. The two company management teams are working on the integration of the two businesses.

You receive an email from Peter Sorchi, the Chief Executive of the merged company:

From: Peter Sorchi, Chief Executive Officer

To: Senior Finance Manager

Subject: Integration of IT and treasury

Hi,

I need you to advise me on a couple of matters. The attached press clipping shows how sensitive this is.

We need to integrate the IT and treasury functions of the former Wodd and Darrell. I thought that it would be a simple matter of identifying the common ground and slimming down both companies’ departments to cover the new entity, but I have the heads of both IT and treasury from each company arguing that their approaches are better for the merged group and that they should take the lead.

Wodd’s Treasurer claims to be an expert in natural hedging of currency risks and Darrell’s argues that her department was highly successful because it makes excellent use of derivatives for hedging. Both agree only on the fact that they cannot work together. I am afraid that I have to agree with them on that and the Board will have the difficult decision of choosing between them.

I have the opposite problem with the IT function. The two Heads of IT are excited to be able to combine their databases and to develop their respective interests in Big Data. They claim that we should retain all of the professional staff in both departments and possibly even expand the merged IT Department beyond that. Given the rationalisation in all of our other functions, I do not think that we can agree to that, but I would hate to throw away a worthwhile opportunity.

Please give me your thoughts on the following:

What approach to hedging is more likely to meet our needs: natural hedging or heavy use of derivatives?

Ignoring hedging, what other factors should we consider in deciding between the two treasurers?

Are the two heads of IT likely to be correct in arguing that we need to retain all existing IT staff in order to exploit synergies in data, particularly opportunities to leverage Big Data?

What would the challenges be in motivating them to reduce their joint staffing levels and how might we deal with these?

Peter