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- Herausgeber: John Wiley & Sons
- Kategorie: Fachliteratur
- Serie: Wiley Finance Editions
- Sprache: Englisch
Mitigate risk and increase returns with an alternative hedge fund strategy Merger Arbitrage: How to Profit from Event-Driven Arbitrage, Second Edition is the definitive guide to the ins and outs of the burgeoning merger arbitrage hedge fund strategy, with real-world examples that illustrate how mergers work and how to take advantage of them. Author Thomas Kirchner, founder of the Pennsylvania Avenue Event-Driven Fund, discusses the factors that drove him to invest solely in merger arbitrage and other event-driven strategies, and details the methods used to incorporate merger arbitrage into traditional investment strategies. And while there is always a risk that a deal will fall through, the book explains how minimal such risks really are when the potential upside is factored in. Early chapters of the book focus on the basics of the merger arbitrage strategy, including an examination of mergers and the incorporation of risk into the arbitrage decision. Following chapters detail deal structures, financing, and legal aspects to provide the type of in-depth knowledge required to execute an effective investment strategy. The updated second edition stresses new, increasingly relevant information like: * Worldwide legal deal regimes * UK takeover code * UK takeover code global offspring * Regulators around the world The book provides clear, concise guidance on critical considerations including leverage and options, shorting stocks, and legal recourse for inadequate merger consideration, allowing readers to feel confident about trying a new investment strategy. With simple benefits including diversification of risk and return streams, this alternative hedge fund strategy has a place in even the most traditional plan. Merger Arbitrage: How to Profit from Event-Driven Arbitrage, Second Edition provides the information that gives investors an edge in the merger arbitrage arena.
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Table of Contents
Series Page
Title Page
Copyright
Preface
Acknowledgments
Part One: The Arbitrage Process
Chapter 1: Introduction to Merger Arbitrage
Notes
Chapter 2: The Mechanics of Merger Arbitrage
Cash Mergers
Stock-for-Stock Mergers
Note
Chapter 3: The Role of Merger Arbitrage in a Diversified Portfolio
Volatility of Stocks Going through a Merger
Merger Arbitrage Universe
Merger Arbitrage Spreads
Performance Characteristics of Merger Arbitrage
Performance of Merger Arbitrage outside the United States
Risk and Return of Merger Arbitrage Funds
Benefits of Merger Arbitrage in a Diversified Portfolio
Benefits of Merger Arbitrage in a Rising Interest Rate Environment
Quantitative Easing
Notes
Chapter 4: Incorporating Risk into the Arbitrage Decision
Probability of Closing
Severity of Losses
Expected Return of the Arbitrage
Notes
Part Two: Pitfalls of Merger Arbitrage
Chapter 5: Sources of Risk and Return
Deal Spread
Two Aspects of Liquidity
Beneficial Participation of Arbitrageurs
Timing and Speed of Closing
Dividends
Short Sales as a Hedge and an Element of Return
Leverage Boosts Returns
Covered Call Writing
Commissions and Portfolio Turnover
Bidding Wars and Hostile Bids
Chinese Companies
Notes
Chapter 6: Deal Structures: Mergers and Tender Offers
Mergers
Scheme of Arrangement
Tender Offers
Comparison of Mergers and Tender Offers
Burger King Provision: The Best of Both Worlds
SEC's Approach to Regulation
Notes
Chapter 7: Financing
Types of Debt Funding
Financing of Mergers versus Tender Offers
Uncertain Merger Consideration
Conflicted Role of Investment Banks
Fairness Opinions
Systemic Risk
Notes
Chapter 8: Legal Aspects
Merger Process
Corporation Codes
Takeover Code and Its Derivatives
Key U.S. Court Decisions
Takeover Defenses
Creeping Takeovers and Mandatory Acquisitions
Best Price Rule
Market Manipulation
Notes
Chapter 9: Management Incentives
Management Compensation
Continuing Management Interest in Private Equity Buyouts
Long-Term Planning in Management Buyouts
Milking a Company through Related Party Transactions
Notes
Chapter 10: Buyouts by Private Equity
Private Equity's Advantage
CEOs Don't Want to Sell to the Highest Bidder
Private Equity Funds Have Their Own Agenda
Buyouts as Financial Engineering
Activists Replace Private Equity
Notes
Chapter 11: Minority Squeeze-Outs
Boards' Lack Effectiveness during Squeeze-outs
Minority Shareholders Are in a Tough Spot
Family Control
Notes
Part Three: Investing in Merger Arbitrage
Chapter 12: Government Involvement
Antitrust Enforcement
Tax Policy
Securities Regulators
State and Provincial Governments
National Governments
China: The Great Wall of Laws
Trade Unions
Notes
Chapter 13: Four Ways to Fight Abuse of Shareholders in Mergers
“Just Sell” Is for Losers
The Rise of Shareholder Activists
Case for Activist Merger Arbitrage
Legal Tactics
Public Opposition
Notes
Chapter 14: Investing in Arbitrage
Trading versus Investing
Leverage and Options
Shorting Stocks
Transaction Costs
Managing the Cash Position
Risk Management
Merger Arbitrage Indices
Separate Accounts
Hedge Funds and Liquid Alternatives
Notes
About the Author
Exercises
CHAPTER 1
CHAPTER 2
CHAPTER 3
CHAPTER 4
CHAPTER 5
CHAPTER 6
CHAPTER 7
CHAPTER 8
CHAPTER 10
Index
End User License Agreement
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Guide
Cover
Table of Contents
Begin Reading
List of Illustrations
Chapter 1: Introduction to Merger Arbitrage
Figure 1.1 Frequency of the Occurrence of the Term
Arbitrage
in Printed Books
Figure 1.2 Frequency of the Occurrence of the Terms
Merger Arbitrage
and
Risk Arbitrage
in Books
Figure 1.3 Risk Spectrum of Merger-Related Investments
Figure 1.4 Stock Price of Dresser-Rand Group around the Rumor of an Acquisition by Siemens
Figure 1.5 Payoff Distribution for Stock Investors
Figure 1.6 Asymmetric Payoff Distribution
Figure 1.7 Lefèvre Diagram of the Put Option Characteristics of Merger Arbitrage
Figure 1.8 Lefèvre Payoff Diagram of Cash Mergers
Chapter 2: The Mechanics of Merger Arbitrage
Figure 2.1 Stock Price of Autonomy before and after the Merger Announcement
Figure 2.2 Idealized Chart of Stock in a Cash Merger
Figure 2.3 IRR Calculation of Annualized Return in Excel
Figure 2.4 Stock Prices of B2Gold and CGA
Figure 2.5 Evolution of the CGA/B2Gold Spread
Figure 2.6 Fluctuation of Health Care REIT's Stock Price Prior to the Merger
Figure 2.7 Optionality in Mergers with a Fixed-Value Collar
Figure 2.8 Optionality in Mergers with a Fixed-Share Collar
Chapter 3: The Role of Merger Arbitrage in a Diversified Portfolio
Figure 3.1 Daily Price Changes (in pence) of Autonomy Corporation before and after the Merger Announcement
Figure 3.2 Cross-sectional Distribution of Daily Returns (a) before and (b) after the Announcement of a Merger
Figure 3.3 Variance of Daily Returns (a) before and (b) after the Announcement of a Merger
Figure 3.4 Number of Mergers and Waves of Merger Activity since the year 1895
Figure 3.5 Worldwide Volume of Mergers (in US$ trillions, left axis) and Level of the S&P 500 Price Index Since 1992 (right axis) Data: Factset Mergerstat
Figure 3.6 Percentage Cash and Stock Mergers over Time Data: Factset Mergerstat
Figure 3.7 Average Annualized Merger Arbitrage Spread
Figure 3.8 Distribution of Merger Arbitrage Spreads (Annualized) in the Middle of Each Year
Figure 3.9 Percentage Spread of the Kinder Morgan / El Paso Merger
Figure 3.10 Piecewise Linear Regression of Excess Merger Arbitrage Returns versus Market Returns
Figure 3.11 Piecewise Linear Regression of Excess Merger Arbitrage Returns
Figure 3.12 Assets Managed in Merger Arbitrage Funds
Figure 3.13 Monthly Performance of Merger Arbitrage Hedge Funds, the S&P 500, and Bonds
Figure 3.14 Performance of Three Merger Arbitrage Hedge Fund Indices Relative to Stocks and Bonds
Figure 3.15 Risk/Return Trade-off for Merger Arbitrage
Figure 3.16 Performance of Various Merger Arbitrage Hedge Fund Indices Relative to the HFR Hedge Fund
Figure 3.17 Efficient Frontiers for Combinations of Stocks and Bonds as well as Stocks, Bonds, and the HFR Index
Figure 3.18 Risk/Return Trade-off for Mutual Funds That Use Merger Arbitrage
Figure 3.19 Efficient Frontier for Mutual Funds That Use Merger Arbitrage
Figure 3.20 Performance of Merger Arbitrage in Periods of Rising Interest Rates
Figure 3.21 Performance of Several Hedge Fund Strategies in Periods of Rising Interest Rates
Chapter 4: Incorporating Risk into the Arbitrage Decision
Figure 4.1 Stock Price of Unisource after the Collapse of the Merger
Figure 4.2 Typical Breakup Fees for Targets of Different Sizes across All Transactions
Figure 4.3 Typical Breakup Fees for Targets of Different Sizes Only for Transactions That Have Breakup Fees
Figure 4.4 Percentage of Transactions with Breakup Fees. (a) $50–500 Million. (b) >$500 Million
Figure 4.5 Prevalence of Breakup Fees. Percentage of Transactions That Contain Breakup Fees for (a) U.S. Mergers with an Announcement Value between $50 and $500 Million (b) Announcement Value of More Than $500 Million
Figure 4.6 Evolution of Breakup Fees for (a) U.S. Mergers with an Announcement Value between $50 and $500 Million (b) Announcement Value of More Than $500 Million
Figure 4.7 Canadian Breakup Fees. (a) Prevalence of Breakup Fees (b) Level of Breakup Fees
Figure 4.8 U.K. Breakup Fees: (a) Prevalence of Breakup Fees (b) Level of Breakup Fees
Figure 4.9 Autonomy Prior to Its Acquisition by HP
Figure 4.10 Pinnacle Resources and Quest Resource Corp. after the Canceled Merger
Figure 4.11 Evolution of Acquisition Premia
Chapter 5: Sources of Risk and Return
Figure 5.1 Evolution of the Spread of the Autonomy Merger
Figure 5.2 Price (left scale; line) and Volume (right scale, in thousands; bars) Chart of Autonomy Common Stock
Figure 5.3 Volume Chart of Trustreet Series C Preferred Stock
Figure 5.4 Order Book for MCG Capital
Figure 5.5 Order Book for Mylan NV
Figure 5.6 Lafarge North America
Figure 5.7 Covered Call Writing
Figure 5.8 (a) Implied Volatility and (b) Option Trading Volume of Superior Essex Inc.
Figure 5.9 Stock Price of Anheuser-Busch Cos.
Figure 5.10 Stock Price of Genentech and the S&P 500 Index
Figure 5.11 Bidding War over 3PAR
Chapter 6: Deal Structures: Mergers and Tender Offers
Figure 6.1 Direct Merger
Figure 6.2(a) Forward Triangular Merger
Figure 6.2(b) Reverse Triangular Merger
Chapter 7: Financing
Figure 7.1 Verenium's Stock Price after BASF's Acquisition Proposal
Figure 7.2 Price of the Sanofi/Genzyme CVR
Figure 7.3 Leveraged Loans: All in Spreads
Chapter 8: Legal Aspects
Figure 8.1 Legal Universes for Mergers and Acquisitions
Figure 8.2 Price of the ISS Global A/S 4.75% Bond Due 09/10
Figure 8.3(a) Timetable for “schemes of arrangement” under the Takeover Code with relevant rules of the Takeover Code or Section of the Companies Act
Figure 8.3(b) Timetable for takeover offers under the Takeover Code with relevant rules of the Takeover Code or Section of the Companies Act
Figure 8.4(a) Timetable for Takeovers in Switzerland
Figure 8.4(b) Timetable for Takeovers in Italy
Chapter 10: Buyouts by Private Equity
Figure 10.1 Stock Price of Merisel at the Time of American Capital Strategies' Acquisition Proposal
Chapter 11: Minority Squeeze-Outs
Figure 11.1 Stock Price of infoUSA after the 2005 Earnings Release and Gupta's Acquisition Proposal
Figure 11.2 infoUSA's Stock Price, 2006–2008
Figure 11.3 Chapparal Resources
Chapter 12: Government Involvement
Figure 12.1 Stock Price of Esmark
Chapter 13: Four Ways to Fight Abuse of Shareholders in Mergers
Figure 13.1 Late Stages of a Company's Life
Figure 13.2 Number of Annual Activist Merger Arbitrage Events (U.S. Mergers Only)
Chapter 14: Investing in Arbitrage
Figure 14.1 Leverage Coupled with Short Selling Leads to Negative Alpha
Figure 14.2 Fees and Short Sale Activity (Utilization of Shares Available) around Dividend Payments
Figure 14.3 Frequency of Merger Closings by Calendar Month, 1990–2013
Figure 14.4 Performance of the IQ Index and S&P Merger Arbitrage Indices Relative to Other Asset Classes
Figure 14.5 Risk/Return Trade-off for the S&P Merger Arbitrage Index Since Its Inception
List of Tables
Chapter 1: Introduction to Merger Arbitrage
Table 1.1 Orders of Arbitrage
Chapter 2: The Mechanics of Merger Arbitrage
Table 2.1 Cash Flows in CGA/B2Gold Merger
Table 2.2 Losses Suffered at a Constant Percentage Spread in a Rising Market
Chapter 3: The Role of Merger Arbitrage in a Diversified Portfolio
Table 3.1 Correlation of Merger Arbitrage Spreads to Different Interest Rates
Table 3.2 Merger Arbitrage Returns for Different Portfolios
Table 3.3 Statistics of Monthly Return for Merger Arbitrage Hedge Fund Indices Compared to Stocks and Bonds over a Quarter Century, 1990–2014
Table 3.4 CAPM
*
Statistics of the Merger Arbitrage Hedge Fund Indices, Relative to the S&P 500
Table 3.5 Various Downside Risk Measures
Table 3.6 Ranking of Merger Arbitrage Relative to Traditional Investment Strategies
Table 3.7 Ranking of Merger Arbitrage Relative to Other Hedge Fund Strategies
Table 3.8 Performance of Merger Arbitrage Prior to Quantitative Easing (1990–2008)
Chapter 4: Incorporating Risk into the Arbitrage Decision
Table 4.1 Failure Rates of Mergers According to Fich and Stefanescu
Table 4.2(a) Average Breakup Fees for Completed and Canceled U.S. Mergers with an Announcement Value between $50 and $500 Million
Table 4.2(b) Average Breakup Fees for Completed and Canceled U.S. Mergers with an Announcement Value of More Than $500 Million
Table 4.3 Average Acquisition Premia over the period 1995-2013
Chapter 5: Sources of Risk and Return
Table 5.1 Arbitrageurs' Holdings of Target Company Stock in Selected Mergers
Table 5.2 Time Periods Required to Close a Merger in the United States, by Industry
Table 5.3 Time until the Collapse of U.S. Mergers, by Industry
Table 5.4(a) Timing of Public Company Mergers in Canada
Table 5.4(b) Timing of Public Company Mergers in the United Kingdom
Table 5.4(c) Timing of Public Company Mergers in Australia
Table 5.4(d) Timing of Public Company Mergers in France, Austria, and Germany
Table 5.5 Improvement in the Arbitrage Spread of the CGI Mining/B2Gold Stock-for-Stock Merger for Different Levels of Short Rebates
Table 5.6 Overview of Spreads from Examples in Chapter 2
Table 5.7 The World's 20 Largest Completed Hostile Takeover Transactions, through Year-End 2014
Chapter 6: Deal Structures: Mergers and Tender Offers
Table 6.1 Mergers and Tender offers in several common law jurisdictions
Table 6.2 Timing in Mergers and Tender Offers, 1980–2005
Table 6.3 Cumulative Abnormal Stock Returns to Targets and Bidders (Individually and Combined) Relative to the Initial Bid Date
Table 6.4 SEC Filings Made by Acquirers and Targets in Tender Offers and Mergers
Chapter 7: Financing
Table 7.1 Milestone Payments of the Sanofi/Genzyme CVR
Chapter 8: Legal Aspects
Table 8.1 Key Characteristics of Mandatory Takeover Rules
Chapter 11: Minority Squeeze-Outs
Table 11.1 Squeeze-Out Thresholds around the World
Chapter 12: Government Involvement
Table 12.1 HSR Transactions, Second Requests, and Merger Enforcement Actions from 2004 to 2013
Table 12.2 FTC Horizontal Merger Investigations: Post-Merger HHI and Change in HHI (Delta), FY 1996–FY 2011 (Enforced/Closed)
Table 12.3 Banking Market in Metropolitan New York, as Seen by the St. Louis Fed's CASSIDI System (top 20)
Table 12.4 Effect of the Wells Fargo/Wachovia Merger in the Metropolitan New York Market on Competition
Table 12.5 Notification Thresholds in Select European Countries
Chapter 13: Four Ways to Fight Abuse of Shareholders in Mergers
Table 13.1 Outcome of Appraisal Actions
Chapter 14: Investing in Arbitrage
Table 14.1 Implied Probabilities of the Closing of Mergers Derived from Option Prices
Table 14.2 Negative Alpha for Different Levels of Leverage, Interest Rate Spreads, and Withdrawal Levels from the Brokerage
Table 14.3 Performance (percentage per calendar year) of Short Biased Hedge Funds According to HFRI
Table 14.4 Fees and Returns Earned by Lenders of Securities
Table 14.5 Index Scenario Probabilities
Table 14.6 Statistics of Monthly Returns of the IQ Index and S&P Merger Arbitrage Indices
Table 14.7 Various Downside Risk Measures
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Merger Arbitrage
How to Profit from Global Event-Driven Arbitrage
Second Edition
THOMAS KIRCHNER
Copyright © 2016 by Thomas Kirchner. All rights reserved.
Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
The First Edition of this book was published by John Wiley & Sons, Inc. in 2009.
Published simultaneously in Canada.
No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222~Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com. Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions.
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Library of Congress Cataloging-in-Publication Data:
Names: Kirchner, Thomas, 1968–author.
Title: Merger arbitrage : how to profit from event-driven arbitrage / Thomas Kirchner.
Description: Second edition. | Hoboken, New Jersey : John Wiley & Sons, Inc., [2016] | Series: Wiley finance | Includes index.
Identifiers: LCCN 2015046839 (print) | LCCN 2016002279 (ebook) | ISBN 9781118736357 (hardback) | ISBN 9781118736807 (pdf) | ISBN 9781118736661 (epub)
Subjects: LCSH: Arbitrage. | Consolidation and merger of corporations. | Stock exchanges and current events. | BISAC: BUSINESS & ECONOMICS / Finance.
Classification: LCC HG4521 .K48 2016 (print) | LCC HG4521 (ebook) | DDC 332.63/2—dc23
LC record available at http://lccn.loc.gov/2015046839
Cover Design: Wiley
Cover Image: ©VladKol / iStockphoto
Preface
Since the first edition of this book interest rates have fallen to near zero and have dragged returns on merger arbitrage with them. With the foreseeable end of the Federal Reserve's zero interest rate policy it is likely that investors will allocate to merger arbitrage again in the near future. This book is written as a guide to potential investors who seek to understand the strategy better prior to committing an investment, investors who may have an allocation to merger arbitrage through model portfolios or maybe even their pension plan, as well as aspiring arbitrageurs.
Merger arbitrage, also known as risk arbitrage, has grown exponentially since the 1980s from small operations within Wall Street firms to standalone arbitrage funds directly accessible to the public. Yet, surprisingly little has been written on the topic. A number of academics have written studies about various aspects of the strategy. For the general public, I can count only six books on the topic. This small number pales in comparison to the information overload that other areas of finance experience. Since Guy Wyser-Pratte's two monographs in the 1970s, only three other books about merger arbitrage have been published. One of them is Ivan Boesky's Merger Mania. Maybe potential writers fear that authoring a merger arbitrage book stands under a bad omen because Boesky was arrested a few weeks after the publication of his book. As the author of a merger arbitrage book, I certainly hope that writing a book and getting arrested are linked only by correlation and not causality.
In this book I try to go beyond a mere description of the arbitrage process to incorporate some thoughts on the benefits of adding merger arbitrage to an investment portfolio, and the vehicles that investors can utilize to access the strategy. The expansion of the book's horizon will make it more relevant to a broader investment audience. Nevertheless, the focus of the book remains on mergers and merger arbitrage and not asset allocation or portfolio management.
The book is organized into three parts: the first three chapters introduce the basics of the arbitrage process and explain the benefits of the investment strategy in the context of a portfolio allocation. Chapters 4 to 8 discuss more details about the analysis involved in an arbitrage decision. Chapters 9 to 11 discuss special transactions that warrant particular diligence by arbitrageurs. Chapters 12 to 14 address additional regulatory aspects as well as practical considerations, including measures arbitrageurs can take to defend their interests, such as exercising appraisal rights.
The first two chapters explain the basic types of mergers and how to set up the arbitrage.
Chapter 3 is an interlude that explains the historical performance of merger arbitrage as an investment strategy, and how it can be added to a diversified portfolio. This chapter in particular will be relevant for investors who are looking to add merger arbitrage to their portfolio.
Chapter 4 expands the basic arbitrage by incorporating risk. Probabilities of failure and potential losses are incorporated into the return calculation to find an expected return of the arbitrage. Chapter 5 discusses different sources of risk and return in more detail, in particular the timing of mergers, leverage, and short sales.
The difference between mergers and tender offers is not well understood by many investment professionals. The terms are often used interchangeably. Chapter 6 goes into details and should be of interest to all investors, not just those seeking to read up on merger arbitrage.
Financing is often one of the most critical parts of an acquisition, and so Chapter 7 will look at different financing options.
Mergers are subject to a plethora of legal requirements, and I discuss them under different angles. Readers should keep in mind that this is a financial book and not a legal textbook, so that many aspects are touched on only in a cursory manner. Boards of directors have to follow a number of procedures to ensure that a merger is fair to shareholders. This will be discussed in Chapter 8.
Unfortunately, the law that is supposed to protect shareholders is often disregarded when managers buy the companies that they are managing as agents of their shareholders. Chapter 9 looks at management incentives for getting mergers done and how the interest of managers are often diametrically opposed to those of shareholders.
Similar conflicts of interest between managers, acquirers, and shareholders can be found in buyouts by private equity funds, discussed in Chapter 10.
Minority squeeze-outs present risks of their own to merger arbitrageurs, and therefore are discussed in a chapter of their own, Chapter 11.
The government gets involved in the merger process on several levels, federal and state. Despite the obvious importance of government regulations, I have decided to relegate its discussion further to the back of the book because I believe that the motivations of the market participants—management, financiers, board members—are more relevant by far to the success of a merger than government regulations, discussed in Chapter 12. As they say: where there is a will, there is a way.
Next, I step into a minefield by encouraging investors to seek to exercise their rights and get full value for their shares when a company is taken over. Chapter 13 describes methods that shareholders can use to that end. Too often have I seen investors resign when their company gets taken over for a lowball price. Most investors view themselves as stock pickers and will throw in the towel too early. I hope that this chapter will convince investors, maybe even some institutional investors, to fight for full value. Chapter 14 gives some practical tips on investing in merger arbitrage. In particular, readers should retain that cash holdings of event-driven investment strategies are dependent on events and not a deliberate asset allocation decision. As a result, merger arbitrageurs can have highly variable cash positions that are not an indication of the arbitrageur's view of the market.
The last chapter contains some mathematical material. Stephen Hawking remarked in the introduction to his well-known A Brief History of Time that his publisher advised him that each formula would reduce the potential readership by half. I trust that readers of financial books can handle a few formulae.
Acknowledgments
I thank the editorial team at John Wiley & Sons for their support throughout the development of the book, in particular Laura Walsh, who first contacted me with the idea for this book, Emilie Herman, Meg Freeborn, and Bill Falloon as well as the reviewers who made valuable comments.
Ron Charnock has been very supportive and encouraged me with many helpful tips. Others who have given me ideas, sometimes unwittingly, that are incorporated in the text are Geoffrey Foisie, Randy Baron, Juan Monteverde, Randall Steinmeyer, Eric Andersen, and Marc Weinberg.
Adam Mersereau recognized the potential behind applying the newsvendor formula to the cash management problem and referred me to Warren Powell, who developed the algorithm in Chapter 14 with Juliana Nascimento.
Ashish Tripathy worked with me on analyzing probabilities for the closing or failure of mergers.
Finally, I thank all authors who have given me permission to reprint tables or figures from other studies.
Part OneThe Arbitrage Process
Chapter 1Introduction to Merger Arbitrage
Arbitrage is one of the oldest forms of commercial activity. One of the earliest published definitions of the term arbitrage can be found in Wyndham Beaves's seminal Lex Mercatoria,1 first published in 1685, which trained several generations of European merchants until its last edition of 1803. One will be hard pressed to find a finance book today that has been in print for over a century. In the 1734 edition, Beaves writes about arbitrage:
ARBITRATION (a Construction of the French Word Arbitrage) in Exchanges has been variously defined by the several Authors who have treated of it.
One says it is a Combination or Conjunction made of many Exchanges, to find Out what Place is the most advantageous to remit or draw on.
Another describes it, by saying it is only the Foresight of a considerable Advantage which a Merchant shall receive from a Remis or Draught, made on one Place preferably to another.
A third construes it to be a Truck which two Bankers mutually make of their Bills upon different Parts, at a conditional Price and Course of Exchange.
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
Lesen Sie weiter in der vollständigen Ausgabe!
