Risk Arbitrage “Merger Arbitrage”

The advent of risk arbitrage which existed in the U.K. for decades preceding its introduction to the United States in an explosive era of historical M&A deals during the 1990’s known as merger mania was pioneered by hedge fund managers, such as Ronald Perelman, T. Boone Pickens, John Paulson, and Carl Icahn who became infamous for their corporate insurgency and speculation as to the takeovers of other companies. Joel Greenblatt writes in his book The Big Secret for the Small Investor that he achieved his colossal returns at Gotham Partners by speculating regarding the outcomes of special situations like spinoffs, mergers, acquisitions, capital restructuring, rights offering, bankruptcies, liquidations, and asset sales which he learned at a Risk Arbitrage firm preceding the establishment of his partnership with Robert Goldstein. Thus it is tenable to apply this method to any of the preceding scenarios of adherence or relation to the following procedure; however for the sake of brevity and clarity this page will expound upon exclusively its application to mergers and acquisitions.