Service Type: Physical Commodity Risk Management
Project: Physical Contracts with Embedded Options/M&A Due Diligence
Our client targeted a supplier of heating oil in the Northeastern United States. The target owned a portfolio of end-user customers and executed many wholesale physical forward contracts to supply their customers. The target also included complex embedded options into its forward purchase contracts.
Approach & Results:
We accompanied the client’s due diligence team to their target’s office to complete the project. Our responsibility was to review and value the physical derivative contracts valuations of the target and perform a high-level review and assessment of the target’s marketing and trading staff. During the review we identified the presence of the embedded options in the physical contracts allowing our client to negotiate a more favorable purchase price of the target after considering the presence of these embedded options.