Merger Arb Spreads: Still High, But Mellowing

A quick survey of merger arb spreads, which have been coming down a little since short-selling has been allowed back. Still some big numbers out there, mostly reflecting nervousness about credit markets and financing. Note: I screened on deals announced since March, on companies with reasonable market caps, etc.

As always, click for a larger version.

Comments

[DonSuper:]

Thanks Paul, interesting table! Do you know if there is a document of website with statistics of how many mergers consumate, how many fail at the different stages, etc? Or where one could find such statistics? Thanks.

2008 Oct 17 01:56 PM

[BombayAdvisors:]

Lots of academic literature out there. Deals historically close at 85-90% rate. Worse at end of '07 because of all the deals that PE backed out of -- Harman, Myers, United Rentals, Sallie Mae, etc.

2008 Oct 17 04:12 PM

[Jimmy Lathrop:]

It's always very interesting that Merger Arbitrage was trampled under the rush to buy into Commodities and play with ETFs and all of that nonsense. Now that the counterparties are insolvent and unwinding their trades, all of that quick money has evaporated. Then we had the completely unbelievable rumor that banks would never loan money again, which, combined with these unregulated institutions deleveraging, pushed the target shares into the basement. Now Paul posts this chart, and we have companies who are looking to boost their revenue through acquisitions, and you can only draw two conclusions. One, there must be really heavy selling pressure through redemptions to be unable to hold onto their shares and two, people have forgotten that investment banks weren't always driven by their nutty prop trading desks, but by actual INVESTMENT.

2008 Oct 17 07:57 PM