Laffitte Risk Arbitrage
An alternative fund dedicated to merger arbitrage in announced deals in Europe and in the United States.
In Practice, the position is to buy or sell stocks (or other equities) which are the target of a take over deal (in cash, stocks or mixed cash and stocks) or a squeeze out.
A common position is to buy the target company at a price below the implied value of the offer (merger spread) and to keep the position till the settlement of the merger.
If the merger is a stock deal (or if the offer is mixed cash and stocks), a selling position on the buying company is put in place to capture the spread between the implied price of the offer and the price of the target company on the market.
When the probability of success looks to be too tight, an opposite position can be set up (selling the target in the case of a cash deal or selling the target company and buying the Purchasing company in the case of a stock deal).
In the case of competitive bids on the target company, it is possible to buy the target shares at a higher price than was indicated in the first offer.
A common position is to buy the target company at a price below the implied value of the offer (merger spread) and to keep the position till the settlement of the merger.
If the merger is a stock deal (or if the offer is mixed cash and stocks), a selling position on the buying company is put in place to capture the spread between the implied price of the offer and the price of the target company on the market.
When the probability of success looks to be too tight, an opposite position can be set up (selling the target in the case of a cash deal or selling the target company and buying the Purchasing company in the case of a stock deal).
In the case of competitive bids on the target company, it is possible to buy the target shares at a higher price than was indicated in the first offer.
