So I dont get it, when I look at this screen, I see companies that are going to be bought at a decent premium to there current market value. Why not just purchase the all cash offering ones ? It can’t be that easy, thats why I am asking to find out what the deal is here.
not all of them will go through - so there is inherent risk
What about the ones trading @ a discount to the offer!?!
ASSet_MANagement Wrote: ------------------------------------------------------- > What about the ones trading @ a discount to the > offer!?! they all are.
^ Not according to MARB with the terminal sitting 3 inches to my left.
Deal risk. There are funds that specialize in doing nothing but this stuff. They try to analyze the chances of a deal blowing up, getting prolonged, etc.
^WHat sort of returns are a lot of these merg arb funds making?
transferpricingCFA Wrote: ------------------------------------------------------- > ^WHat sort of returns are a lot of these merg arb funds making? It’s a short gamma trade so you’ll have many small gains followed by a large loss. Returns depend on the spread volatility, but think small consistent returns.
So essentially these merg arb funds look at something like these bloomberg screen, investigate and asses which ones are likely to go through and invest in the target?
M&A arbitrage. Some trade on rumours to get in the deal early. Some trade on good takeover candidates to establish themed investments waiting for a catalyst. Some trade on announced deals. From that point they look at the dynamics (cash vs shares) and estimate what the chances of success are (lots of things can make it blow up). Then they leverage the deal and hedge non-deal related factors. Then they monitor their positions through the life and adjust as events unfold. Needs lots of specialists e.g. people who can read the documents and quantify regulator risk (monopoly commission etc). Possibly multinationally too. Some times the returns are explosive and some times disastrous. Worst is when the M&A market closes down and there is nowhere to put capital to work. Or when a regulator bans short selling. Or the markets go into free fall. Or investors pull their cash (it’s not the most liquid strategy). Then there are things like short covering etc etc
Muddahudda Wrote: ------------------------------------------------------- > Worst is when the M&A market > closes down and there is nowhere to put capital to > work. Or when a regulator bans short selling. Or > the markets go into free fall. Or investors pull > their cash (it’s not the most liquid strategy). > Then there are things like short covering etc etc sounds like a bad dream i had a few years ago