As a business, risk preparation is always key. However, even with optimal planning, there’s always room for disruption in a steady workflow. Taking steps to minimize disruptive risk is critical to the success of a transaction, particularly when it comes to completing sensitive mergers and acquisitions.
Strategic buyers, private equity firms, and deal participants, especially across borders, need to keep transactional risk top of mind while closing deals. Common instances of transactional risks that can impact M&A activities include:
- Foreign exchange deals: Cross-border transactions create economic exposure and high volatility.
- Commodity: Fluctuation in prices impact all parties involved.
- Interest rates: Fluctuation of interest rates can also impact transactional value.
- Counterparty obligations: Relying on a partner in a business transaction always comes with a level of risk if contractual agreements cannot be met.
- Timeliness: Market condition changes can impact the time it takes for a transaction to finalize.
Tax treatments taken by buyers and sellers within M&A activities can also make it difficult to manage transactional risk, as can fraudulent conveyance.
Strong due diligence, coupled with insurance designed specifically for transactional risk, can help facilitate your deal.