Merger Arbitrage: How to Profit from Event-Driven Arbitrage
Merger arbitrage, also known as risk arbitrage, is not a new concept in the field of finance, yet information about this discipline has been hard to come by—until now.Written by Thomas Kirchner, President of the Pennsylvania Avenue Funds and Manager of the Pennsylvania Avenue Event-Driven Fund—a mutual fund that uses merger arbitrage as one of its investment strategies—this is the definitive book on one of the most effective forms of arbitrage. Organized into three comprehensive parts, this reliable resource introduces you to the basics of the arbitrage process in Part One, discusses the possible pitfalls of the approach in Part Two, and deals with some practical questions of investing in merger arbitrage in Part Three.Filled with in-depth insights and expert advice,Merger Arbitragegoes beyond the description of the arbitrage process to examine the benefits of adding merger arbitrage to your portfolio, while introducing you to the vehicles that can be used to incorporate this strategy into your everyday investment endeavors.Initial chapters are dedicated to the ins and outs of the strategy—cash mergers versus stock-for-stock mergers, sources of risk and return, and deal structure—while later chapters focus on making merger arbitrage work in today's dynamic market. Along the way, you'll also become familiar with other essential aspects of this discipline, such as management incentives for getting mergers done, fighting for full value of shares when a company is taken over, and government involvement in the merger process. The potential for the abuse of shareholder value and conflicts of interests in mergers are highlighted throughout the text, as are the red flags to watch out for. Designed with the serious investor in mind,Merger Arbitrageaddresses the most important issues in this field and will put you in a position to profit from a better understanding of leverage and options, shorting stocks, and the legal aspects of merger arbitrage, including seeking appraisal or filing lawsuits for inadequate merger consideration.Merger arbitrage is an event-driven strategy that generally has a low correlation with market movements. If you're looking to gain an edge in the merger arbitrage arena—and profit regardless of market direction—this book has everything you need to succeed.