Module II· EV-Equity BridgeAdvanced

Question

What FX complications arise in cross-border valuations in the bridge?

Answer

Mechanics

For cross-border targets (e.g. a European acquirer buying a US subsidiary), FX complications arise:

Net debt in several currencies − convert all into the valuation currency at spot or forward rates.
Pension liabilities often in local currency (e.g. a UK DBO (Defined Benefit Obligation) in GBP).
The consolidated group has different currency exposures per division.
Hedging programs: existing hedges are a 'hidden' asset/liability − mark them to market in the bridge. In practice: apply spot FX at the valuation date consistently. Forward FX for earn-outs in a foreign currency.

Deep diveShow more details

Pitch tip

'USD-denominated valuation; non-USD net debt converted at spot (EUR debt $120m, GBP debt $40m); FX-hedge MTM −$8m as an additional bridge item.'

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