With M&A activity on track for a record year in 2016, minimizing pension risk and managing pension costs is critical for both buyers and sellers. Mercer M&A transaction experts Jeff Cox and Chuck Moritt, along with pension risk expert Richard McEvoy, explain how to do this efficiently using Mercer’s Pension Debt Management Solution.
Jeff Cox, Global M&A Transaction Services Leader
Chuck Moritt, North America Multinational Client Group Leader
Richard McEvoy, US Financial Strategy Group Leader
Demystifying pension risk is becoming more and more important to sellers looking to maximize exit price. Defined benefit pension plans raise red flags for potential buyers and can devalue what first appeared to be an appealing transaction. Pension volatility also poses risks for sellers: while short-term volatility is normal for DB pension funds, this can mean major losses within the period of the sale.
A solution that stabilizes the funding process and reduces short-term volatility and helps eliminate buyers’ misconceptions about pension risk can help turn the red flags green. What does a solution like Mercer’s Pension Debt Management solution provide both the buyer and seller?
For the seller:
For the buyer:
“Pension risk really balloons from the seller and buyer perspective when you’re looking at the impact on the purchase price during a very short period of time,” says Richard McEvoy. “So we look at hedging strategies to deal with that increased risk.”
Another common worry is hidden costs. As our pension expert Richard McEvoy explains, a comprehensive pension debt solution evaluates those costs and provides an overview of the potential impact of equity changes and interest rate changes. It’s all part of the market-to-market evaluation that Mercer provides to simplify the complex issue of pension debt in M&A transactions.
We'r eager to speak with you. Please provide your details below.