Any experience in agreeing to FX/Spot Rate for Valuation in transaction?

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December 09, 2020

by a searcher from Mount Royal College in Calgary, AB, Canada

In a cross border transaction - does any one have any experience/ideas related to agreeing to an FX rate on a certain date for the exchanged rate valuation for a acquisition?
- current local (investors) currency is favorable compared to the foreign currency of the acquiree company while we are just entering the process.
Outside of hedging on our own, any one had experience tying foreign currency valuation to an FX rate?

Thank you!

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Reply by a searcher
from IESE Business School in Los Angeles, CA, USA
If you want to settle on a rate and know the date of the transaction, the futures rate for that date could be an “objective” figure that is market based. E.g., if the transaction is 3 months from now, use the 3-months futures rate. That also makes potential hedging a bit easier. Having a bit more background on your goal and the potential differing agendas of the parties involved may be helpful in giving you a better answer though.
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Reply by a searcher
from University of California, Berkeley in San Francisco, CA, USA
My former colleague in FX at a bulge bracket bank started his own FX advisory firm. I'd be happy to make intro.. The issue isn't complicated but its more than agreeing to rate and date. Its also proper accounting.
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