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Hear this out loud PauseA deal contingent forward is a derivative contract that is placed before closing the transaction, locking in market conditions and a forward rate, although it fades away without any payment or obligation if the acquisition does not close.
If the underlying deal fails to complete but a transaction (or series of transactions) which is equivalent to the underlying deal completes within a specified period, the phoenix clause requires a true-up between the bank and the non-bank party.
Enter deal-contingent hedging For example, a vanilla FX forward requires the two parties to sell euros for dollars to one another, as an obligation to be settled on a pre-specified date in the future. Under a deal-contingent forward, the obligation is only triggered if the underlying M&A transaction is completed.
contingent hedge combines the best aspects of a standard FX forward and an FX option: it requires no payment upfront, locks in a forward rate, and disappears if the M&A fails.