The Deal Matrix
Author Shaun Murdock
Language Context English
The Engineering Challenge
In M&A and Private Equity, the 'Deal' is a bundle of instruments designed to transfer risk to the target and upside to the acquirer. My work involves deconstructing these bundles to identify Toxic Covenants that trigger demutualisation.
The Instrument Audit
I classify instruments based on their impact on Governance Sovereignty and Asset Lock Integrity.
| Instrument Family | The Extractive Variant (Toxic) | The Generative Variant (Safe) |
|---|---|---|
| Debt & Hybrids | Convertible Note Debt converts to Equity upon default or 'Qualified Financing'. Risk: Accidental sale of the company. | Revenue-Based Note Debt is repaid as % of monthly revenue (e.g. 5%) up to a 2x cap. Benefit: No equity dilution. |
| Equity & Options | Warrants / Options Right to buy shares at a strike price. Risk: Aligns management incentives with 'Exit' (Sale). | Redeemable Pref Shares Non-voting capital with a fixed coupon. Benefit: Capital acts like a bond; Governance stays with workers. |
| Derivatives | Speculative Swaps Betting on price direction for profit. Risk: Exposure to unrelated market volatility. | Defensive Hedging Interest Rate Swaps (housing co-ops) or Commodity Futures (coffee) to lock in stability. Benefit: Predictability and price sovereignty. |
Toxic Term Flagging
When auditing a Term Sheet for a cooperative client, I apply a filtering logic derived from M&A best practices to flag 'Trojan Horse' clauses.
- Liquidation Preference (>1x): Ensures investors do not get paid multiples of their investment before workers see a penny.
- Drag-Along Rights: Prevents investors from forcing workers to sell the company against their will.
- Board Seat Rights: Ensures capital has a voice (observation) but not a vote (governance).
The Prospectus Audit (UCITS / AIF)
This logic extends to the translation of fund documentation. When translating French or Spanish prospectuses for the UK market, I audit for FCA Consumer Duty compliance.
- Duty of Care vs. Vigilance: Ensuring that French devoir de vigilance is not mistranslated as a fiduciary "Duty of Care" where none is intended.
- SFDR Alignment: Ensuring that "Impact" claims in the translated KIID are substantiated by the structural reality of the underlying assets, preventing greenwashing liability.