Question 1

What is merger arbitrage?

Accepted Answer

Merger arbitrage is a strategy that seeks to capture the spread between a target company's current trading price and the value an announced acquisition is expected to deliver if it closes. After a deal is announced the target usually trades at a discount to the offer because the deal might fail. The spread compensates for that risk; if the deal closes the spread is realized, and if it breaks the position can lose value.

Question 2

What is HSR or a second request?

Accepted Answer

HSR refers to the Hart-Scott-Rodino Antitrust Improvements Act, which requires parties to most large U.S. mergers to notify the FTC and DOJ and observe a waiting period before closing. If regulators want a closer look they can issue a 'second request' for additional information, which extends the waiting period and is often a sign of heightened antitrust scrutiny that can delay or threaten a deal.

Question 3

What does probability of close mean?

Accepted Answer

Probability of close is a model estimate of how likely an announced deal is to be completed, expressed as a percentage. It reflects factors such as regulatory and shareholder approval risk and financing conditions. It is a hypothetical model output, not a guarantee — a 90% estimate still means the deal could fail, and the figures shown are illustrative and point-in-time.

Question 4

Is this investment advice?

Accepted Answer

No. This page presents illustrative, hypothetical model outputs for informational and educational purposes only. Nothing here is investment, legal, or tax advice, a research report, or an offer or solicitation to buy or sell any security. Probabilities, fair values, and spreads are model estimates from a point-in-time snapshot, may be stale, and do not represent actual trading or client accounts. Consult a qualified financial professional before making any investment decision.

M&A Deal Research & Merger Arbitrage