 |
Definition of 'Merger Arbitrage'
A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless profit. A merger arbitrageur looks at the risk that the merger deal will not close 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. This discrepancy is the arbitrageur's profit.
|
 |
Investopedia explains 'Merger Arbitrage'
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.
|
-
Profiting from arbitrage is not only for market makers--retail traders can find opportunity in risk arbitrage.
Read More »
-
These investments can add a new level of diversification to your portfolio.
Read More »
-
This high-risk strategy attempts to profit from price discrepancies that arise during acquisitions.
Read More »
-
-
Find out how you can change your investing strategy based on market conditions.
Read More »
-
Hedge funds seek positive absolute returns, and engage in aggressive strategies to make this happen.
Read More »
-
Discover the advantages and pitfalls of hedge funds and the questions to ask when choosing one.
Read More »
-
Learn what corporate restructuring is, why companies do it and why it sometimes doesn't work.
Read More »
|
|
