Merger Arbitrage Hedge Strategy

Merger Arbitrage Hedge Strategy

by Richard C. Wilson & Family Offices Group Association Team

Family Office Definition: Merger Arbitrage Hedge Strategy

Merger Arbitrage Hedge Strategy definition:  Merger arbitrage is an event-driven hedging strategy which involves buying long and selling short the stocks of companies involved in merger and acquisition deals.  The targeted companies are bought long when trading below the acquisition price. The acquiring company is sold short before the price drops to reflect the amount paid for the deal. If the deal is not completed for any reason or is disapproved of, prices can move in the wrong direction on either side of the transaction and negatively impact performance.

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