Using Commercial Paper to Fund Growth – DSM CFO

Rolf-Dieter Schwalb, CFO of DSM: “At the moment, commercial paper is a great financing instrument.”

DSM, a Dutch life sciences and material sciences company that posted annual revenues of €9 billion in 2012, has been pursuing a very active mergers and acquisitions strategy in recent years. Since 2010, DSM has spent over €2.8 billion on acquisitions to radically transform the company: shifting away from the cyclical chemicals business, towards a more stable nutrition business. “After some major divestments prior to 2010, we actually had negative net debt on our balance sheet, so financing the acquisitions really wasn’t a problem,” says Rolf-Dieter Schwalb on CFO Insight TV.

Transforming the finance function

When it comes to DSM’s general funding strategy, “commercial paper is currently a great instrument,” the CFO believes. As long as the company keeps its single-A rating, commercial paper provides a cheap and flexible form of funding. In the near future, however, DSM does not intend to use its easy and inexpensive access to capital for additional M&A deals. For now, the company has enough to chew on with integrating its acquisitions from last year. The company’s transformation is about more than M&A, though. “We are also looking at how to streamline the finance function itself,” says Schwalb. DSM is currently setting up a shared-service centre in India to optimise processes and save costs. Schwalb thinks that his company, like many other European enterprises, is actually late to the game in this regard. But now he is fully convinced of the usefulness of this move.