Deal contingent forward

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Foreign exchange risk management.

A deal contingent forward is a specialised forward foreign exchange (FX) contract.

The hedging customer is only obliged to fulfil the contract if a planned major transaction, such as an acquisition, occurs.


Reverse complexity

"There is quite often a risk around the FX of these transactions, which comes from the fact that we are raising equity in sterling to make a euro transaction acquisition.
Obviously, if the relative value of sterling and the euro changes between the point that you commit to raise the sterling and spend the euros, there is a risk associated.
That involved us putting in place a deal contingent forward.
This is basically a forward contract where the banks agree with you that if the transaction does not occur, then it expires worthless, but if the transaction goes through, then you get a specific FX rate."
Adam Richford FCA FCT, Group Treasurer, Renewi, The Treasurer, August 2018, p18.


See also