Deal-contingent hedge

BY MICHAEL SHANG · SIXTEEN YEARS IN COMMERCIAL BANKING · UPDATED 2026-11-06

// THE SHORT ANSWER

A deal-contingent hedge is a currency or interest rate hedge, usually a forward or a swap, that takes effect only if a named acquisition completes and falls away without a break cost if it does not. A buyer uses it when the price or the acquisition debt is fixed well before completion, often while approvals are awaited, and a move in exchange or interest rates before then would change what the deal costs. The protection is paid for in a less favourable rate, and the bank providing it carries the risk of the deal failing, so it reads the conditions to completion closely.

BASIS  Practitioner judgment from sixteen years in commercial banking, set out in How Bankers Think (Highbank Press, 2026). Every borrower on this site is a composite constructed for teaching, not a client. The market is mid-market commercial lending as practised in New Zealand and Australia; where a convention differs elsewhere, the page says so.