Maksim Labkouski
Merger arbitrage is an event-driven investment strategy of betting on a successful acquisition of a publicly-listed company. The spread between the target company’s trading price and the offer price is generally supposed to reflect the risk/uncertainty the market sees in the transaction. I find that quite often (especially in smaller cap deals) the market is mispricing those risks, which creates attractive investment opportunities.
Overall, merger arbitrage situations are among my favorite special situation strategies given that they:
- have a short timeline, allowing for high annualized returns.
- are generally uncorrelated with the broader market, thus presenting a way to diversify an investor’s portfolio, particularly in a worsening macroeconomic environment.
- have a binary outcome which allows to more easily quantify the odds of a favorable outcome.
Below I present 21 merger arbs with the widest spreads currently available on the market. The list includes my analysis on each situation and the reasons for the wide spread. Additionally, you will find a downloadable PDF of all these merger arbs.
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