Have you ever tried Merger Investing before? First let’s discuss what is a Merger Arbitrage. Merger Arbitrage is a form of a risk arbitrage that exploits the inefficiencies of the stock prices of a company that has agreed to a merger with another company. You can as an investor generate returns that are greater than the risk free investments by taking on the risk that the merger will not happen or it will happen but at a later date or at a price that is lower than the agreed price. Let’s discuss the merger bid between Microsoft and the Yahoo. In the spring of 2008, Microsoft made a hostile offer of $47.5 billion to Yahoo for a merger. When the merger bid was announced by Microsoft, Yahoo stocks soared. However after four months Microsoft abandoned the merger bid as it was shunned by Yahoo. Yahoo stocks fell in price after the merger attempt was shunned. But later an internet search alliance between the two companies went through in a slightly different form and was approved by both the US and the European Antitrust Regulators in February 2009.
Now, this was the example of a type of merger between two big well known companies. This is an example of how merger investing works. Suppose, a company X announces to acquire a company Z for a stock price of $10 per share. The stocks of company Z are selling at a price of $5 but once the announcement is made the stock price soars to $8 per share. Company X is a reputable company in its market sector and the merger and acquisition news of Z with X is good news for the market so the stock price soars to $8 per share, so there is a spread of $2 per share.
This spread of $2, you can exploit by buying the stock Z for $8 per share. Your potential return is 20% if the merger goes through as announced. But there is a risk of the merger not taking place as that happened between Microsoft and Yahoo above. Many mergers and acquisitions don’t go through. So what you need to do is look for companies that are in the later stages of their merger and acquisition stage so that the risk of merger not taking place goes down. If you do your homework well and look for those mergers and acquisitions that are not getting much publicity but have solid fundamentals behind them, you can make pretty good returns in a short period of time. So merger investing can be a form of short term investing with a very low risk if you invest at the later stages of merger and acquisition process. There are infact 5 general steps to any merger and acquisition process that generally works like this:
1. Both companies initiate the merger and acquisition process after doing their due diligence.
2. Negotiations on the price and other merger details.
3. Going to the shareholders for the preliminary approval.
4. Getting the Government Regulators approval.
5. Getting the final approval from the shareholders.
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So you need to do your homework when going for merger investing as there is always a risk of the merger deal not going through. But near stage 4, the odds of the merger deal going through increases so this is might be the best time to go for merger investing. By putting the odds in your favor, you can increase the likelihood of making a profit from a merger and acquisition deal. With this Merger Investing Monthly Subscription you will be able to get real time data on all announced public mergers. Merger Investing monthly subscription will show you risk arbitrage profit opportunities by providing you with the spreads watch data for all the public mergers that have been announced. With the Merger Investing Monthly subscription, you will get real time updates on the merger deal, merger arbitrage profit calculations with real time quotes, information on the closing conditions of the merger plus much more. So if you are a merger investor, this Merger Investing Monthly Subscription can help you tremendously in finding profitable deals. You can try it RISK FREE for 60 days!