Wednesday, April 26, 2006

Pensions in M&A

While this highly acclaimed new Corporate Finance textbook with its fresh angle from political economy doesn't even mention pensions as an index entry, this interesting IFRS update article makes the point that - even under the regime of IAS 19 - pensions need not be a deal breaker, they are merely an important pricing factor.

If that is so, then there is probably a case to be made for consolidating a firm's pensions operations in one European IORP, especially if the transaction reaches across borders. In a takeover, the seller will be able to put a price tag on improved transparency and risk management capabilities of such a structure, as opposed to the incumbent compartmentalised country solution. This better price tag is likely to go some way in covering the set-up cost of setting up such structures.

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