Deal-contingent trades see pick up in activity

Dealers saw a return of the deal-contingent market last year, amid a flurry of takeovers and mergers. But this business continues to pose some real risk management challenges for banks. By Peter Madigan

Acquiring a company can be a tricky business. The successful completion of a deal hinges on a number of variables – the winning of shareholder and regulatory approval, the securing of financing and the avoidance of a last-minute bid for the target by a rival.

For cross-border deals, a further risk is introduced in the form of foreign exchange movements – if a European company agrees to pay a certain sum in dollars for a US target, the cost of that in euro terms can be significantly higher if the