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Legal entity rationalization – Operational execution PMO
Sample of common issues by function – Previously encountered
Legal Finance/Accounting — Vendor, supplier, and key customer contract implications
— Current or potential litigation — Facility lease assignments or transfers
— A/P, A/R, and invoicing process — Customer and vendor account implications — Management and financial reporting changes
Tax HR — Indirect tax implications (VAT, GST, sales/use, and property)
— Direct tax implications (income, franchise, deferred tax, apportionment, and effective tax rate)
— Real estate transfer tax
— Payroll migration and third-party support — Employee transfer and successor employer implications
— Employee benefits and reporting
Operations Sales and marketing — Fleet registration, permit, and insurance policy transfers
— Customer and vendor contracts — Registrations to conduct business
— Website rebranding — Customer contract notifications and approvals — Updates to branded packaging, signage, etc.
IT Treasury — Changes to ERP to reflect new legal entity structure — Historic data retention requirements for impacted entities
— Changes to invoices, EDI, and other customer- facing docs
— Updates to bank accounts and cash sweeps process
— Know Your Client process updates — Updates to loan and security agreements and i/c process
Business models changed by challenging market conditions, increasing regulation, and globalization have left many organizations mired in a web of organizational complexity. This is likely to be further compounded by a growing increase in merger and acquisition activity across many industries. As a result, companies seeking to cut costs and create a more efficient organizational structure are taking a closer look at the potential benefits and risks of legal entity rationalization (LER). Utilizing a structured and organized approach through a project management office (PMO) will support the execution of a complex LER initiative, whether undertaken for business transformation, ERP systems migration, or strategic internal restructuring.
A successful, on-time LER initiative requires a well-organized and detailed plan that incorporates the principal financial and operational objectives of the initiative. Collaboration with operational leaders, and with legal, human relations, IT, finance, and tax teams,
is necessary to develop an efficient and time-sensitive plan to meet those objectives. Once created, execution of the plan by owning departments helps achieve desired goals with minimum disruption to normal business operations and customer and vendor relationships. KPMG has the experience and tools necessary to quickly assemble and maintain an LER execution PMO to facilitate the client’s initiative, help realize anticipated cost savings, and identify and navigate potential hazards to a successful project.
KPMG’s approach and value proposition
We have facilitated and implemented our LER execution approach for Fortune 1000 clients in multiple industries. We tailor our standardized approach for each client and engage functional specialists when needed to streamline the PMO process and identify potential issues early.
1Legal entity rationalization – Operational execution PMO
Our processA disciplined approach leveraging prior experience allows us to identify and navigate potential hazards promptly in the process in order to minimize disruption and avoid missing deadlines. Structured cross-functional organization, defined cadence, and transparency with leadership all serve to achieve LER initiatives.
Key areas: overall local project lead, Legal, HR, Finance, Property, T&C, Treasury, Property, Tax, and IT
Validation of LE data points by U.S. project leads for each function
Work across functions to identify owners responsible for each LE data point and coordination of timing
Establish biweekly reporting cadence with emphasis on execution, issue resolution, and identification of mitigation strategies
Responsibility of local country project leads identified above
LER by Country - Process Flow
Identify local country projects leads
Customize local country LE data points
U.S. project leads provide sign-off
Initiate local country data collect process
Develop LER PMO work plan
LER PMO roadmap and dependency matrix
LER PMO execution and issue escalation
Develop LE roadmap, cross-functional dependency matrix, and timeline; identify any timing issues across work streams
Develop milestone-level work plan to facilitate local country operational readiness
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KPMG LER tools and templatesOur tools and templates have been developed and refined based on experience drawn from LER PMO projects, are tailored to specific industries, and are scalable to each client’s initiative.
— LER Key Considerations Matrix Provides a starting point and checklist tailored to each industry and client and is to be assessed by global function owners and incorporated into a customized work plan
— Workplan Automation Tool Facilitates efficient, customized, and streamlined executive reporting into PowerPoint templates. Automating extraction of work plan milestones, status, owners, and deadlines for reporting purposes at all levels (executive, manager, function, etc.) significantly reduces manual errors and duplication of efforts.
— Legal Entity Manager LEM Automation Tool KPMG’s customized web-based LEM Tool streamlines how LE information is organized, viewed, stored, and maintained to provide an informed perspective for planning across the entire organization. Each instance LEM for our clients is customized to address the individual goals of the business and provide flexibility, collaboration, a visual depiction, and framework for control. LEM facilitates the identification of opportunities and hazards of contemplated transactions by making LE data available to leadership in realtime, early in the transaction planning process.
3Legal entity rationalization – Operational execution PMO
Some or all of the services described herein may not be permissible for KPMG audit clients and their affiliates.
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Contact usPadric Kelly O’BrienManaging Director M&A Tax Transition ServicesT: 212-872-2957 M: 317-709-2203 E: [email protected]
Nathan PearsonSenior ManagerM&A Tax Transition ServicesT: 917-438-3584 M: 773-301-3241 E: [email protected]
Louis ColeDirectorM&A Tax Transition ServicesT: 404-739-5842 M: 404-307-0584 E: [email protected]
CredentialsKPMG has supported organizations with LER project management and execution across ERP system migrations, business transformations, internal restructurings, integrations, spin-offs, and other divestiture initiatives. We are able to leverage our historical knowledge, prior experience, and tested tools and templates to lead the LER PMO and help navigate potential hurdles and roadblocks to the transaction.
Coordinated Global SME Collaboration
The information contained herein is of a general nature and based on authorities that are subject to change. Applicability of the information to specific situations should be determined through consultation with your tax adviser.
© 2019 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. All rights reserved. Printed in the U.S.A. The KPMG name and logo are registered trademarks or trademarks of KPMG International. NDP036860-1A
