Merger Arbitrage

Merger Arbitrage is a hedge fund strategy that implies simultaneous buying and selling the stocks of two companies that are in the process of merging.
This strategy is used when the merger deal process is unsure to be finished. This uncertainty produces the price of the company that is being bought to be lower than the price of a merged company’s stock will have. The difference in the price is the profit for the one who conducts the sale with Merger Arbitrage strategy – the arbitrageur.
Merger arbitrageurs don’t care whether the deal will be conducted to the end; they just follow the process and buy during that process.