Deal-contingent hedging: how to hedge an acquisition that might not complete

A cross-border acquisition creates a currency exposure the day it is announced, and one you only want hedged if the deal completes.

The problem with an ordinary forward

A buyer agrees to pay for an overseas business in a foreign currency, with closing some months out and subject to approvals. From announcement the exposure is live, but it is conditional, because if the deal breaks there is nothing left to hedge. Hedge it with an ordinary forward and you are covered while the deal is on, but if it then falls through you are left holding a hedge against nothing and a mark-to-market that can run either way. Leave it unhedged and a few months of currency movement can shift the real cost of the acquisition on a price that was supposed to be fixed.

How deal-contingent hedging works

Deal-contingent hedging is built for that shape: a forward or option structure that comes into effect only if the deal completes and falls away at no cost if it does not. The bank underwrites the completion risk and prices it into the rate, so you carry no exposure to a transaction that never happens.

Where the skill sits

The skill sits in the structuring rather than the instrument. You are hedging a market variable conditional on an event, so the pricing turns on the probability the deal closes and the time it takes to get there. Read those well and the buyer reaches completion with the cost locked and nothing stranded if it falls over.

Why waiting has a cost

The instinct is to wait until the deal is certain before acting, by which point the currency has often already moved. Deal-contingent hedging is what lets you take the exposure in hand from the day it appears without betting on an outcome you do not yet control.

First published as a LinkedIn post on 29 June 2026. Read and comment on LinkedIn.