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#1
08-03-2007, 04:59 PM
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Member
Join Date: Jun 2007
Posts: 63
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Mergers arbitrage
Hi,
I would like to have more information on how mergers arbitrage works. Can anyone provide relevant links/resources describing how mergers work. Thank in advance | |
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#2
08-07-2007, 08:54 PM
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Member
Join Date: Jun 2007
Posts: 37
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Merger arbitrage is also called risk arbitrage. It's not really a pure arbitrage but its risk is perceived to be very little. An example might be:
XYZ Co decides to buy XXX Co which trades on the exchanges at $20. XYZ is willing to pay a premium of $10 per share over XXX's trading price. Thus, he offers $30 to buy 100% of it. Theoretically, the merger arbitrage trader would either buy XXX at $20 on the open market and tender it to XYZ for $30 when the deal closes (pocketing a $10 per share profit) OR buy XXX on the open market at $20 and SHORT XYZ to lock a riskless profit.
__________________
A lonely trader | |
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#3
08-23-2007, 10:20 PM
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Member
Join Date: Jun 2007
Posts: 33
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this is a very good site to research merger deals coming to the market. http://www.thedeal.com
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#4
08-24-2007, 05:38 PM
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Member
Join Date: Jul 2007
Posts: 49
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a few more links on the subject
http://www.investopedia.com/terms/m/mergerarbitrage.asp and Trading the Odds with Arbitrage at http://www.investopedia.com/articles.../04/111004.asp | |
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#5
08-24-2007, 07:25 PM
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Member
Join Date: Jun 2007
Posts: 63
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thanks all. I find the Trading the Odds with Arbitrage article very enlightening. Thanks!!
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| Good resource site for mergers and acquisitions? | hedger | M&A | 5 | 07-25-2007 03:51 PM |
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