Unlock the true value of Legal Entity Optimization

Legal Entity Optimization (LEO) plays a critical role in mergers. It doesn’t just enable organizations it delivers huge efficiencies in addition to cost and operational savings. If you master LEO strategy you can go beyond reducing the legal entities your organization handles and realize its full benefits.

7 Minutes By Emeric Chevalier Life Sciences 01/03/2024

At a Glance

  • LEO is crucial for simplifying corporate structure post-merger. It can deliver cost savings, fewer tax filings, and simplified administrative processes. On top of that it can also activate synergies across departments and teams.
  • There are a variety of LEO strategies available, and in this article, Emeric Chevalier, a-connect Client Service Partner, discusses how to deliver them with maximum and lasting benefit

LEO programs open the door to multiple benefits

Direct cost savings and enabling better integration are just the start. It also results in fewer tax filings, simplified accounting and reporting management. This in turn reduces audits and inter-company agreements.  Indirectly, LEO also facilitates better synergies across your organization whilst also mitigating the risks associated with complex legal structures.

Various Legal Entity Optimization strategies exist

Each type of transaction is tailored to specific objectives and operational situations, such as:

  • Traditional mergers.
  • Reversed mergers.
  • Liquidations.
  • Assets transfers.
  • Reversed assets transfers.
  • Legal Entity Renaming.

The choice should align with post-merger scenario strategic goals as well as the merger tax plan.

Success requires a focus on both local and global dimensions

Local governance with locally recognized champions and diverse, inclusive, functional teams, is essential. At the global level, you’ll need to set up an Integration PMO. They can employ a phased approach that structures countries in waves with clear work plans.

It is also recommended to start LEO in countries that are easier to launch in first. This allows you to test and refine tools, governance and frameworks.

Before starting LEO:

  • Establish proactive communication with local leadership. 
  • Identify function leads.
  • Map legal entity structures.
  • Address potential roadblocks.

It’s also vital that all LEO project managers are fully trained on critical aspects of the project. This must include:

  • Local governance.
  • Global integration structure.
  • The scope of critical workstreams.

After the legal entity mergers go-live, consolidate all pending activities into a single document with clear deadlines and responsibilities. Empower local champions to drive and follow-up on LEO completion.

Post-implementation, ensure LEO remains on track with:

  • Daily calls.
  • Consolidated issue logs.
  • Regular pulse-check surveys.

Remember to always celebrate success in person or through internal comms. This helps build enthusiasm, momentum and, crucially, a team spirit across local and functional leads.

Legal Entity Optimization is more than a financial restructuring

It is a strategic lever that can propel an organization into a new era of integrated strength. But mastering LEO in the dynamics of a merger is a nuanced art. It requires a delicate balance between local and global considerations, strategic foresight, and meticulous execution. Through this, organizations unlock operational efficiency and a pathway to sustained success.

If you’re navigating a post-merger and contemplating Legal Entity Optimization, contact our team for information and support.

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