Hedge Fund Strategies>Merger
Arbitrage
Merger Arbitrage:
A trading strategy that seeks to benefit from stock price
movements driven by one company merging with or buying another company. A typical
transaction involves shorting the stock of the buyer and purchasing the stock of the
company being bought. A merger arbitrageur looks at the risk of the merger deal not
closing on time or at all. Because of this slight uncertainty the target company's stock
will typically sell at a discount to the price that the combined company will have when
the merger is closed. A regular portfolio manager may focus only on the profitability of
the merged entity. In contrast, merger arbitrageurs care only about the probability of the
deal being approved and how long it will take the deal to close.
Merger Arbitrage Indices
hedgefundsinvesting.com
Merger
Arbitrage Example
Includes formula for calculating the annual return of arbitrage investments.
about.com
Overview of Merger
Arbitrage
"merger arbitrage returns are consistently positive year in and year out"
americanventuremagazine.com
Introduction to Merger
Arbitrage
97% of friendly acquisition offers are completed.
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