BlackLine completed the acquisition of FourQ, the intercompany financial management vendor, on January 26th. It will further strengthen the BlackLine financial management technology capabilities, which is already seen as a market leader in financial management solutions.
Intercompany transactions can quickly become complex. According to a study by FourQ, 96% of finance teams find challenges with intercompany transactions. 99% believe that critical accounting responsibilities are becoming more complex and challenging. These challenges include charging interest on intercompany debt, guarantee fees, and accounts receivable factoring. Transfer pricing is increasingly complex with little formal guidance from the authorities but increasing audits according to PWC. This challenge becomes increasingly complex for multinational companies dealing with different national authorities. The current volatility of interest rates further exacerbates it, as does the increasing inflation seen in some countries.
Intercompany transactions are further complicated by the requirement for organisations to introduce flexibility in their global supply chains and cross-border M&A activity. Built by intercompany experts, FourQ seeks to address this complex challenge. FourQ OneBiller delivers end-to-end automation of intercompany transactions with configurable rates between buyers and sellers.
Marc Huffman, BlackLine CEO, commented: “Intercompany accounting is one of the biggest distractions for finance and accounting for multinational corporations. Hard to believe, but most companies are still using legacy, repetitive and manual processes to manage intercompany, exposing their businesses to unnecessary costs, significant compliance risks, and missed working capital and tax opportunities. F&A must become more agile to respond to constantly evolving market dynamics and regulatory needs—but they’re often buried in tactical transactional work and inter-company disputes. Intercompany challenges are not new, but with increasingly complex global business models and regulatory scrutiny, demand for intercompany transformation is higher than ever.”
BlackLine paid $165 million when the deal closed. There is also an earnout of $75 million, paid over the next three years, subject to financial performance milestones. BlackLline will provide more information about the transaction during its Q4 and year-end earnings conference on Feb 10th 2022. BlackLine paid for the deal out of existing cash rather than a loan. This is a good exit for Dubilier & Company, the lead investor in a $6 million seed funding round in September 2019.
Varun Tejpal, co-founder and CEO of FourQ, will join BlackLine as part of the deal. He will become the managing director, Intercompany at BlackLine. Tejpal commented: “FourQ and BlackLine share a vision to help optimize customers’ global operations for greater profitability and efficiency while freeing F&A teams to focus on strategic aspects of their business. At the same time, FourQ meets a need in the Office of the Controller that is highly complementary to BlackLine’s comprehensive financial operations management platform.
I look forward to reducing the headaches caused by messy intercompany accounting processes and further cementing BlackLine’s market-leading position as we join forces to help customers continue to advance their intercompany journeys.”
According to Deloitte, “Intercompany financing transactions are clearly on tax authorities’ radars”. The FourQ solution automates many time-consuming processes and helps assure compliance with tax laws. It assures compliance with new e-invoicing mandates and optimises applicable tax rates for transactions. In turn, this can help reduce FX risk and improve both working capital and profitability.
Huffman added: “By moving to a modern intercompany accounting environment and eliminating distraction, companies can unlock capacity in F&A to focus on what matters most to the business.”
Enterprise Times: What does this mean
In FourQ, BlackLine has acquired a firm and a set of experts in intercompany transactions. This will strengthen its portfolio. It also stops any rival from acquiring what might have given them a competitive edge.
This is also good news for BlackLine customers. FourQ targets the world’s largest enterprises. It has annually processes $34 billion in intercompany transactions across 110 countries. This means there are several joint customers, including AIG. Georgia Roe, system administrator American General Life, commented in a recent case study: “We couldn’t, wouldn’t live without BlackLine!”. Despite that statement, they still purchased FourQ, indicating a gap in the BlackLine portfolio that is now filled.
The only thing missing from the press release is how quickly and how BlackLine will integrate the FourQ technology into its own platform. What synergies are between them, and when can customers expect to see them.