Cash has to move from minute one.

The bank account architecture Newco needs.

Newco needs a minimum of one operating account, one receipts account, one disbursements account, and one payroll funding account on Day One. Larger Newcos with international operations need accounts in every functional currency and every jurisdiction of operation. Smaller Newcos can consolidate into fewer accounts but cannot operate without the basic split between receipts, disbursements, and payroll. The architecture determines how cash moves and how reconciliations work.

Account opening takes 4 to 12 weeks at most banks. The bank requires Newco's certificate of incorporation, employer identification number, beneficial ownership documentation, and signatory authorities. Each of these depends on legal entity formation, which often lags the deal calendar. Programs that start bank account documentation at signing usually finish in time. Programs that wait until close usually run into Day One with seller controlled accounts and a manual cash workaround.

Bank selection matters more than buyers expect. The bank that holds Newco's accounts also provides revolving credit, treasury management technology, foreign exchange, merchant services, and trade finance over time. Switching banks later is expensive and disruptive. The selection process should run early and consider future capability needs, not just the Day One requirements. Most PE backed Newcos use the bank that the sponsor has a relationship with, which simplifies the process and improves the pricing.

Account funding on Day One must cover at least one full operating cycle plus a buffer. The number runs from low millions to hundreds of millions depending on Newco scale. The funding source is typically the buyer at close, sometimes supplemented by a revolving credit facility. Underfunding produces immediate operating distress. Overfunding ties up capital. The number needs to be modeled in cash flow detail during diligence and refined before close. The Day One context is in carve-out Day One readiness.

Customer payment routing on the first morning.

Customers pay to whatever account is on the invoice. If invoices say the seller, payments arrive at the seller. The seller is contractually required to forward those payments to Newco under the TSA, but the mechanics vary from clean daily sweeps to monthly manual transfers with reconciliation gaps. The cleaner path is to update invoices and payment instructions before Day One so customers route payments directly to Newco accounts.

The customer communication campaign needs to start 30 to 60 days before close. Customers receive notice of the change in legal entity, the new payment instructions, and the effective date. Large customers receive direct outreach with account team support. Mid-market customers receive emails with confirmation tracking. Small customers receive notices in invoices. The campaign needs reconciliation against actual payment behavior in the weeks after close because some customers ignore the notices.

Lockbox arrangements need attention. Many customers pay by mailing checks to bank lockboxes operated for the seller. Newco needs its own lockbox arrangements with the bank, set up before Day One, with addresses on new invoices. The transition from old lockbox to new lockbox takes time as customers update their accounts payable systems. The TSA needs to address the receiving and forwarding of payments mailed to the seller's lockbox after Day One.

Electronic payments require similar handling. ACH and wire instructions on the seller's accounts need to redirect to Newco's accounts. Customers using electronic invoicing networks need updated supplier records. Payment processors holding Newco's merchant accounts under the seller's name need to transfer or recreate the accounts. Each of these is small individually and significant in aggregate. The treasury workstream needs full ownership of the routing transition.

Working capital and the close mechanics.

The purchase agreement defines the working capital target at close. The actual working capital at Day One usually differs from the target because of timing, inventory movement, and accruals. The difference is settled in a post-close true up over 60 to 180 days. The treasury function must track every working capital component, reconcile to the agreement definitions, and document positions for the true up negotiation.

Cash on the balance sheet at close is a separate calculation. Most deals are structured as cash free and debt free, meaning the seller takes cash and pays off debt before close. Newco starts with whatever cash the buyer funds. In other structures, some cash transfers with the business. The treasury function needs absolute clarity on which cash transfers and which does not, with traceable banking records on the morning of Day One.

Open trade receivables and payables at close are particularly tricky. Receivables originated under the seller are sometimes collected by Newco, sometimes by the seller and remitted. Payables incurred by the business but not yet paid at close are sometimes assumed by Newco, sometimes by the seller. The treatment is dictated by the purchase agreement and the closing balance sheet. The treasury function operationalizes the agreement and reconciles the actual cash flows against expected flows.

Intercompany positions need careful handling. Pre-close, Newco often has receivables from and payables to other parts of the seller. These positions are typically settled at close in the closing balance sheet adjustment. The treasury function documents the closing positions, agrees them with the seller, and resolves disputes through the true up. Failure to lock positions before close creates protracted true up disputes. The financial close picture is detailed in finance separation in TSA exit.

Treasury technology and bank connectivity.

A standalone Newco needs treasury technology that the seller previously provided as part of enterprise infrastructure. Cash positioning, payment initiation, bank reconciliation, foreign exchange, and reporting all require systems. The systems range from full treasury management platforms for larger Newcos to lighter cloud tools for smaller ones. Selection happens early because integration with bank feeds and the ERP takes weeks.

Bank connectivity is the foundation. Newco needs SWIFT or host to host connections, file transfer protocols for ACH and check files, and API connections for real time balance information. Each bank has its own technical requirements and onboarding timelines. Programs that defer bank connectivity to post Day One operate with manual processes for months and accumulate avoidable risk.

Payment controls need full attention. Dual authorization, approval workflows, segregation of duties, and fraud detection rules must be configured before any payment is released. The seller's controls do not apply to Newco. Newco's controls must exist on Day One. A first payment released without proper controls creates immediate audit exposure and potential fraud opportunity.

Treasury reporting needs to support the operating partner and CFO from week one. Daily cash position, weekly cash forecast, monthly cash flow analysis, and quarterly working capital metrics all require the underlying systems and the underlying processes. Reporting that comes online late forces operating decisions to be made without data. The CFO who lacks treasury reporting in month one usually lacks confidence in month six. The interplay with day to day finance is in Day One finance readiness.

Where treasury programs most often slip.

The most common slip is starting bank account opening too late. The bank documentation depends on legal entity formation, which depends on the deal structure being final. Programs that wait for deal structure certainty before starting bank documentation often arrive at Day One with seller controlled accounts as the only working option. The remedy is to start the bank application process at signing with placeholder structure that can be amended once final.

The second common slip is underestimating customer payment behavior. Customers do not update their accounts payable systems on the buyer's schedule. Payments continue to flow to seller accounts for months after Day One. The TSA needs to address the receipt and remittance of misdirected payments. Newco needs reconciliation processes that catch every payment, regardless of which account it arrives in. Programs that ignore this dynamic experience cash collection gaps in months one through six.

The third common slip is mismatching working capital at close. The target working capital in the purchase agreement is set during diligence. The actual working capital at close depends on the timing of close, the customer mix, and the operating rhythm in the final weeks before close. Sellers sometimes optimize working capital in the run up to close in ways that produce difficult true up positions for the buyer. Treasury needs to track working capital weekly in the lead up to close and raise concerns early.

The fourth common slip is delegating treasury to the seller through the TSA. Treasury services in the TSA produce immediate operational risk and ongoing cost. The seller has limited incentive to optimize Newco's cash position. The seller's treasury team is staffed for the seller's needs. Newco that operates on the seller's treasury through the TSA pays more, sees less, and exits later. Treasury is one of the workstreams that should move to Newco fastest, often before Day One.

More on carve-out finance.