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The merger arbitrage activity has been slow of late and it is no surprise. I mentioned in January that I expected mergers and acquisitions to slow down as financing became difficult to acquire.

In particular, merger arbitrage opportunities have been scarce ever since the failed Emageon (EMAG) deal with Stanford (my theory, anyway) and the spread for other mergers has not been wide enough to offer any real decent returns.

I invest in mergers when it is close to finalized in order to reduce as much risk as possible. Step 5 is usually a good time to invest in a merger if the spread is still decent on an absolute basis after considering fees.

I do not invest after a merger announcement as there are too many variables to consider.

  1. Due diligence by both parties
  2. Financing and regulator approval
  3. Get preliminary shareholder sentiment (or controlling shareholder approval)
  4. Obtain regulator (SEC, FCC, any and all) approval
  5. Get final shareholder approval at a meeting called for that purpose
  6. Insiders continually vesting or buying shares

Pending Merger Acquisition Arbitrage List

Looking at this list, there isn’t much to take advantage of. Image Entertainment (OTC:DISK) has far too much risk involved and the company fundamentals are terrible for it to be a standalone company.

Fat Pitch Financials recently tweeted about an initiation of En Pointe Technologies (ENPT) which does seem to be the best merger at the moment.

Symbol Announced Date Closing Value Last Price Closing Date Profit Annualized Profit
DISK 11/20/2008 $2.75 $1.58 4/6/2009 74.05% 0.00%
ACBA 9/10/2008 $5.14 $6.04 4/30/2009 -14.97% -237.58%
FRBK 11/10/2008 $7.12 $7.60 4/30/2009 -6.26% -99.31%
NTMD 1/27/2009 $0.80 $0.75 4/30/2009 6.67% 105.80%
BFBC 11/10/2008 $9.21 $9.68 4/30/2009 -4.86% -77.07%
CVTX 3/12/2009 $20.00 $19.94 4/30/2009 0.30% 4.78%
EQ 10/27/2008 $37.94 $37.38 6/30/2009 1.49% 6.46%
CYCL 11/7/2008 $8.50 $8.32 6/30/2009 2.16% 9.40%
ZICA 2/26/2009 $0.81 $0.77 6/30/2009 4.68% 20.32%
ABNJ 12/15/2008 $7.83 $9.50 6/30/2009 -17.57% -76.35%
PBKS 12/19/2008 $8.07 $7.52 6/30/2009 7.29% 31.67%
AANB 1/2/2009 $2.38 $2.25 6/30/2009 5.87% 25.53%
SWIM 1/8/2009 $8.89 $8.75 6/30/2009 1.58% 6.86%
AVNX 1/27/2009 $28.97 $2.14 6/30/2009 1253.96% 5448.77%
NCX 2/23/2009 $6.00 $5.83 6/30/2009 2.92% 12.67%
GVHR 3/5/2009 $4.00 $4.01 6/30/2009 -0.25% -1.08%
ENPT 3/11/2009 $2.50 $2.05 6/30/2009 21.95% 95.38%
LIMC 4/3/2009 $2.48 $2.25 8/15/2009 10.44% 29.32%
MXGL 3/2/2009 $16.77 $16.48 9/30/2009 1.78% 3.69%
MV 4/1/2009 $25.72 $25.04 9/30/2009 2.71% 5.61%
WYE 1/26/2009 $46.35 $42.48 10/31/2009 9.10% 16.05%
TKTM 2/10/2009 $3.88 $3.81 11/15/2009 1.71% 2.81%
SGP 3/9/2009 $25.63 $23.20 12/31/2009 10.49% 14.28%
FCVA 4/3/2009 $9.25 $8.00 12/31/2009 15.62% 21.27%

Disclosure: No positions held at time of writing

Source: A Look at M & A Arbitrage Activity