Risk Arbitrage, A Probabilistic Approach Over 1998-2010 in the US and Canada

18 Pages Posted: 17 Nov 2010

See all articles by Stephane Dieudonne

Stephane Dieudonne

OFI Asset Management

Fabienne Cretin

OFI Asset Management

Slimane Bouacha

OFI Asset Management

Date Written: November 15, 2010

Abstract

This document is a quantitative analysis of risk arbitrage strategy across a sample of 1,911 M&A deals announced between January 1998 and September 2010 in the US and Canada. The study quantifies the main specific risk factors for each merger & acquisition deal from a probabilistic standpoint. It emerges that the biggest risk factors are: intent of the offer (hostile or friendly), buyer typology (industrial or financial), the relative size of the buyer compared to the target and the risk arbitrage spread calculated over the first five days following the announcement of the bid. Ultimately, it is hoped that this document will provide managers with an interpretation of the mergers & acquisitions market as well as a decision-making tool to complement traditional qualitative analysis.

Keywords: Risk arbitrage, merger arbitrage, merger & acquisition, termination probability, risk factors

JEL Classification: G10, G12

Suggested Citation

Dieudonne, Stephane and Cretin, Fabienne and Bouacha, Slimane, Risk Arbitrage, A Probabilistic Approach Over 1998-2010 in the US and Canada (November 15, 2010). Available at SSRN: https://ssrn.com/abstract=1710194 or http://dx.doi.org/10.2139/ssrn.1710194

Stephane Dieudonne (Contact Author)

OFI Asset Management ( email )

1 rue Vernier
Paris, 75017
France

Fabienne Cretin

OFI Asset Management ( email )

1 rue Vernier
Paris, 75017
France

Slimane Bouacha

OFI Asset Management ( email )

1 rue Vernier
Paris, 75017
France

Register to save articles to
your library

Register

Paper statistics

Downloads
563
Abstract Views
2,110
rank
47,424
PlumX Metrics