News Digest: Merger arb funds sense opportunities as M&A transactions face closure risk
July 26, 2022
The U.S. stock market presently offers several attractive opportunities, from a risk/reward perspective, to wager on the probability of various mergers and acquisitions that have been struck eventually going through, some so-called merger arbitrage hedge funds have said.
Amid a U.S. economic deceleration, heightened anti-trust scrutiny and the challenge of financing highly leveraged deals in fragile debt markets, multiple high-profile transactions are currently having a spread of over 10% between the target’s current stock price and the buyer’s offer. For merger arb funds, a gap of 10% or more is considered as a gauge of a substantial level of scepticism regarding a deal’s chances of closing.