FDs ignoring M&A pension risk

Finance directors are overlooking the importance that pension schemes play in corporate mergers and acquisitions at a time when M&A activity is increasing worldwide.

According to MetLife Assurance, just one in three FDs at companies with defined benefit pension schemes believe that pension derisking is important in deciding the outcome of a merger or acquisition.

The company’s second annual UK finance director survey shows 44 percent of FDs at companies with defined benefits schemes believe pension derisking is “not very important”, while a fifth have not even considered the importance of derisking in deciding the outcome of any possible transaction.

“Given that the role of pension deficits in making and breaking M&A transactions has been demonstrated time and time again, it is surprising that so few finance directors seem to recognise the importance of derisking in deciding the outcome of M&A activity,” said Dan DeKeizer, CEO of MetLife Assurance.

Figures from data provider Dealogic show in the first three quarters of 2010, global announced M&A value reached $2.03tn (£1.27tn), an increase of 22 percent compared with the $1.67tn in deals announced in the same period in 2009.

European M&A deals accounted for 28 percent of the value of global deals announced to the third quarter of 2010. The UK accounted for 24 percent ($140.1bn) of total European value.

In the December issue of Financial Director, we provided a checklist for FDs to tidy of their pensions liabilities if they are looking to sell their business. Read more here.