Valuing Pension Plans in Mergers and Acquisitions: Which Method to Choose?

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During the past five years, pension plan sponsors in the United States have dealt with another perfect storm of pension financial volatility, with large swings in asset returns and high-quality corporate bond rates trending to historic lows. These factors have contributed to erratic profit and loss (P&L), balance sheet volatility, and material increases in cash costs. In the mergers and acquisitions (M&A) world, putting the right value on a company's defined benefit plans can be the difference between a successful transaction and one that fails to meet objectives.