FX deal-contingent hedging for a large PE fund
Case studies

FX deal-contingent hedging for a large PE fund

  • Large EUR PE fund acquiring a UK business with a consideration payable in GBP
  • Equity for the transaction was denominated into EUR giving rise to FX risk between signing and closing of the acquisition price
  • Deal was subject to regulatory approval which implied a low risk of the acquisition failing to complete
  • The client had the choice between eight deal-contingent providers (inbounds + banks involved in the deal)
Our Approach
  • JCRA conducted an independent review of the SPA to offer two alternatives for implementation achieving different objectives and timelines
  • We managed and coordinated an efficient process with a tight schedule (three BD to trade) with the client, the selected banks and all the other parties involved (M&A lawyer for due diligence and a derivatives lawyer to review the deal confirmation)
  • We provided additional input during the process: deal-contingent option discussion, flexibility to settle before closing and other commercial points
  • Finally, JCRA conducted live benchmarking during implementation of trade ensuring efficient, transparent pricing achieved
  • Tailor made process to the underlying M&A situation, the banks involved and the size of market risk in order to create the best pricing environment while limiting the amount of work/resources on the client side
  • Very tight deadline for implementation
  • Highly attractive pricing with a dealcontingent premium of less than 20% of the at-the-money option
  • Flexible settlement mechanism allowed for the delivery of the contract at any date between the first and the long stop date at no additional cost

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