Alternative Assets and Strategic Allocation: Rethinking the Institutional Approach

CHAPTER 7

Merger Arbitrage

Merger arbitrage, which is also often called risk arbitrage, has a reputation as an aggressive, no-holds-barred trade, and its practitioners have acquired a fair amount of notoriety as financial buccaneers. This is largely undeserved, although this claim should not be taken imply the reverse, that it is really a pedestrian activity pursued by colorless, green-eyeshade-and-sleeve-garter types. The reputation probably stems from the insider trading scandals of the late 1980s, which brought attention and eventually a prison sentence to Ivan Boesky, an arbitrageur who was far from colorless. The paraphrase of his thoughts on greed that contributed the only memorable line from the film Wall Street probably ensured that ...