IQ Merger Arbitrage ETF
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Merger arbitrage must-knows: The basics of antitrust analysis
Antitrust is usually the biggest risk for a deal to break. All mergers over a certain dollar threshold must pass muster from the antitrust authorities in the U.S. and if they do business overseas, the antitrust authorities there.
Merger must-knows: The typical timeline for a friendly deal
Typically, approaches end up with a deal. Why? The target board of directors has a fiduciary duty to shareholders to get the best price for the company.
Identifying and analyzing a typical cash merger arbitrage spread
What are the components of a risk arbitrage spread? There are a number of factors that figure into a trade. Let’s look at a typical cash deal first.
Merger arbitrage must-knows: A typical stock merger spread
Not all deals are cash deals, however. Often companies will issue stock in lieu of giving cash for a deal. This adds a layer of complication to the process and also some risk factors we need to consider.
Don’t trade the Office Depot spread like a typical arb spread
Once the proxy comes out, check the transaction background and see if they ran an auction. If not, a private equity buyer may step in after the deal breaks.
Handicapping the risk-reward balance of the Office Depot deal
Staples stock was up on the announcement, and the analyst community understands the pressure this segment is under. At any rate, no Staples vote is needed.
Merger must-knows: Why the proxy statement is important
If there’s a vote for the deal, the next step will be the release of the preliminary proxy statement. The proxy statement contains all the data in the merger agreement as well as some other important pieces of data.
Merger arbitrage must-knows: A key guide for investors
Merger arbitrage, otherwise known as “risk arbitrage,” is an investment strategy that primarily focuses on mergers and capturing the spreads on announced deals.
