Who foots the bill when super funds merge?

Who pays the costs of a merger, REST chair Ken Marshman asked panelists involved in superannuation mergers at the Australian Superannuation Investment Conference yesterday.

The panel discussed how mergers will impact the investment strategy of superannuation funds.

The panelists included Tasplan chair Naomi Edwards who has experience with many mergers, VicSuper chief executive Michael Dudon whose fund is in advanced stages of due diligence to merge with First State Super to create a $120 billion entity, and PwC partner David Coogan who has advised on merger transitions.

"It is always a merger of equals, we know that. But someone pays. And who pays - is that a negotiation that takes part between party A and party B?" Marshman asked the panel.

Edwards said the costs are initially divided equally but once the two funds have some clarity, the decision of who foots the bill is driven by the tax and other benefits to the combined super fund.

"It depends what phase of the merger discussions you are in. What I have seen is that typically, up until the date when you go unconditional on the merger, in other words you've satisfied all your due diligence requirements, typically - depending on their size but assuming that they are equal size - the parties would share any direct external costs," she said.

Edwards added once the interested parties have gone unconditional and are definitely going to merge, it's no longer a point of negotiation because they are going to be one fund.

"It's very much finance and tax and accounting driven as to where is the best place for the expenditure to occur to maximise the tax benefits for the combined fund going forward and so that stage, it doesn't actually matter who meets it," she said.

"Those costs need to be parked where the combined group of members can most benefit from the tax relief on the costs."

Tasplan merged with RBF Tasmanian Accumulation Scheme and Quadrant Super in about four years ago.

It was recently part of another potential merger when Statewide Super, WA Super and Tasplan signed a memorandum of agreement but the talks were unsuccessful.

Read more: TasplanAustralian Superannuation Investment ConferenceKen MarshmanDavid CooganFirst StateMichael DudonNaomi EdwardsVicSuper
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