Managing bid-to-completion FX risk without embedding break-losses or undermining deal credibility
Sector: Infrastructure – Core / Regulated Assets
Asset Class: Cross-Border Infrastructure Equity
Situation Type: Competitive offshore acquisition with FX exposure between bid and completion
Primary Issue: Execution-stage FX risk driven by deal uncertainty, where conventional hedging embeds unacceptable break-risk or undermines bid credibility
The Situation
An infrastructure investor pursued a material offshore acquisition through a competitive auction process.
The purchase price was denominated in foreign currency, while equity capital was funded domestically. The bid-to-completion period extended over several months, with discrete approval and closing milestones.
From the seller’s perspective, FX certainty was required to support a credible bid.
From the buyer’s perspective, committing to a standard FX hedge before deal certainty created material downside if the transaction failed.
The issue was not asset quality or valuation.
It was whether FX exposure could be governed without crystallising losses on a deal that might never complete.
Why This Scenario Is Common
-
Cross-border infrastructure deals have long, milestone-based timelines
-
FX exposure is highest when deal certainty is lowest
-
Treasury tools assume certainty of drawdown
-
Vanilla forwards embed asymmetric unwind risk
-
Options impair economics at scale
-
Sellers reward certainty, not hedging theory
This is execution risk, not market risk.
Why It Matters
When FX risk is mis-handled during acquisition:
-
Bid credibility is compromised
-
Break-risk losses become IC-material
-
Liquidity stress can surface at the wrong moment
-
FX becomes a gating factor rather than an execution input
-
Investment teams are forced to choose between certainty and discipline
Nothing “blows up”. Value leaks through structure.
How This Is Typically Addressed
-
Leaving FX unhedged until completion
-
Using vanilla forwards sized to headline value
-
Paying excessive option premium for certainty
-
Accepting break-loss as unavoidable
-
Treating FX as a pricing footnote rather than an execution constraint
These approaches manage optics, not outcomes.
Primary Engagement Route
Primary Offer: Derivatives Portfolio Review™ – Transaction FX & Execution
Deal-stage FX exposure mapping, break-risk containment, contingent hedge architecture, and governance alignment.
Secondary / Bespoke:
Milestone-based trigger design, natural hedge integration, CSA and margin structuring, seller-facing FX certainty narrative.
Read the IC Brief → (2-page decision summary). Find out more about Contingent FX Forwards
Full structural narrative shared selectively on request.
Illustrative scenario for discussion purposes only. Not a transaction summary or client-specific case study.