It is commonplace for businesses to be bought or sold, merged or to go through regular refinancing or restructures. It is therefore important that trustees understand the mechanics and the commercials around such financial corporate transactions.
It is in the interest of the pension scheme that these financial transactions, especially those which provide much-needed working capital for businesses, are not impeded so as to ensure the longevity of the sponsoring business, thereby ensuring that the support for the pension scheme is maintained.
Clearly the terms of any transaction need to be appropriate and fair in relation to the pension scheme as one of the sponsor’s primary and secured creditors.
Having been through numerous corporate transactions, restructures and re-financings, 20-20 Trustees are very well placed to help a pension scheme’s board to understand the corporate transaction, to know what questions to ask, to communicate the decision to The Regulator, using formal clearance if necessary.
From a sponsor’s perspective, they typically feel comfortable in the knowledge that there are professional independent trustees who are able to understand and agree a sensible and pragmatic outcome without using the situation to obtain unnecessarily burdensome terms. Indeed in a number of situations making unrealistic demands can derail a potentially beneficial transaction, ultimately leading to a worse outcome for the pension scheme and its members.
From a pension scheme’s perspective, having professional and experienced trustees that understand which levers can be pulled, to improve the outcome for a pension scheme without detriment in the commercial terms of the transaction is valuable. This can lead to improved funding for the scheme and reduced risk for scheme members and the sponsor.