Risk arbitrage : an investor's guide / Keith M. Moore.

Format:

Book

Author/Creator:

Moore, Keith R. (Keith Russell), author.

Series:

Wiley finance series.

Wiley finance series

Language:

English

Subjects (All):

Arbitrage.

Physical Description:

1 online resource (370 pages).

Edition:

Second edition.

Place of Publication:

Hoboken, New Jersey : John Wiley & Sons, Inc., [2018]

System Details:

text file

Summary:

The definitive guide to risk arbitrage, fully updated with new laws, cases, and techniques Risk Arbitrage is the definitive guide to the field and features a comprehensive overview of the theory, techniques, and tools that traders and risk managers need to be effective. This new edition is completely updated and fully revised to reflect the changes to laws and technology and includes new case studies and a detailed discussion of computer-based trading systems. Readers gain deep insight into the factors and policies that affect merger transactions, and the new developments that allow individuals to compete with professionals in managing risk arbitrage portfolios. The book provides techniques for computing spreads and determining risk, with practice exercises that allow readers to become confident with new methods before using them professionally. The current wave of corporate mergers, acquisitions, restructurings, and similar transactions has created unprecedented opportunities for those versed in contemporary risk arbitrage techniques. At the same time, the nature of the current merger wave has lent such transactions a much higher degree of predictability than ever before, making risk arbitrage more attractive to all types of investors. Risk Arbitrage provides the essential guidance needed to participate in the business. Get up to date on the most recent developments in risk arbitrage Examine new mergers and the legal changes that affect them Learn how computers and trading systems have affected competition Use the tools that enable risk determination and spread computation Both the growth in hedge funds and the changing nature of the merger and acquisition business have affected risk arbitrage processes and techniques. For the finance professional who needs expert guidance and the latest information, Risk Arbitrage is a comprehensive guide.

Contents:

Cover

Title Page

Copyright

Contents

About the Author

Chapter 1: Introduction

Chapter 2: What Is Risk Arbitrage?

Types of Transactions

Mergers

Tender Offers

Exchange Offers

Spinoffs

Recapitalizations

Activist Situations

Speculative Situations

Chapter 3: The Risk Arbitrage Industry

Chapter 4: Estimating the Return on a Risk Arbitrage Position

Simple Deals

Stock-for-Stock Deals

Stock-for-Stock Deals Using a Fixed-Exchange Ratio

Using Short Sales to Lock-in a Deal Spread

Complex Stock Merger Transactions

Collars on Stock-for-Stock Transactions

Example 1

Example 2

Actual Example of a Collar Deal

Prorated Transactions

Leverage

Example

Leveraged Returns on Stock-for-Stock Transactions

Spread Behavior over Time

Timing of Risk Arbitrage Transactions

Estimating Timing in Merger Transactions

Estimating Timing in Tender Offer Transactions

Chapter 5: Estimating the Risk of Arbitrage Transactions

Assess the Price History of the Target Company

Estimating the Total Risk of a Transaction

Using Other Methodologies to Assess the Risk of Arbitrage Transactions

Using the Market-Adjusted Return Method to Assess Risk

Estimating Changes in Market Values Using a Sample of Comparable Companies

Calculating PRGO's Implied Price Using P/E Method

Calculating PRGO's Implied Price Using EV/Sales Method

Calculating PRGO's Implied Price Using EV/EBITDA Method

Conclusion

Chapter 6: Estimating the Probability of a Transaction's Occurrence

Gathering Information

Conducting Initial Research

Gathering Financial Information on the Proposed Transaction

Gathering Legal Information on the Proposed Transaction

Vertical Mergers

Committee on Foreign Investment in the United States (CFIUS).

The European Commission

MOFCOM

Gathering Tax and Accounting Information of a Proposed Transaction

Chapter 7: The Risk Arbitrage Decision Process

Dynamic Aspect of Risk Arbitrage Analysis

Even-Money Probability-A Tool for Risk Arbitrage Decision Making

Even-Money Probability Formula

Calculating Complex Risk-Adjusted Returns

Chapter 8: Hostile Takeovers

Differences between Contested and Uncontested Takeovers

Takeover Defenses

Staggering the Tenure of the Board of Directors

Diluting Shares via Poison Pills

Using Defenses Based on Bylaws

Defending via Private Lawsuits

Using State Takeover Laws as a Defense

Other Types of Defenses

Regulatory Defenses

The "Just-Say-No" Defense

Defenses Against Activist Investors

Recapitalization

Sale of the Target Company

Predicting the Outcomes of Various Defensive Strategies

A Hostile Takeover Case: Airgas/Air Products

Use of Decision Trees

Estimating Value in Contested Takeover Attempts

Analyzing Comparable Companies

Analyzing Comparable Transactions

Analyzing Discounted Cash Value

Summary of WFM Situation and Valuation Estimates

Risk Assessment

Summary

Chapter 9: Trading Tactics

Determining Position Size

Execution of Transactions

Example: Bass Pro Shops' Acquisition of Cabela's

Timing of Executions

Using Computers to Aid Trading Tactics

Trading Transactions with Collars

Example: Merger of Rockwell Collins and B/E Aerospace

Hedging the Collar Options

Chapter 10: Portfolio Management

Position Limits and Portfolio Diversification

Setting Individual Position Limits

Sensitivity Analysis

Portfolio Deal-Break Risk

Additional Methods to Limit Risk

Friendly Transactions

Leveraged Buyouts.

Recaps, Spinoffs, Targets for Sale, and Situations Where the Targets Have Received an Offer

Grouping by Cash Flow

Portfolio Analysis by Spread

Overbids

Hedging

Melding a Position Sheet with a Risk Arbitrage Analysis

Other Risk Containment Measures

Futures

Option Hedging

A Buy-Write Example

A Put Example

Chapter 11: The Exciting World of Risk Arbitrage

The Event Timeline: The STRP/T/VZ Deal

The STRP/T/VZ Adventure

The Aftermath of the STRP/T/VZ Takeover Battle

Appendix A: Tender Offer Document

Appendix B: Airgas/Air Products-Text of Court Decision

Introduction

Appendix C: Whole Foods Markets-Excerpts from Proxy Statement

Summary of Evercore's Financial Analysis

Precedent Transactions Analysis

Discounted Cash Flow Analysis

Appendix D: Straight Path Communications-Excerpts from Proxy Statement

Background of the Merger

Verizon's Reasons for the Merger

Appendix E: Straight Path Communications-Excerpts from STRP's 8-K Filed on April 13, 2017

Acknowledgments

Index

EULA.

Notes:

Includes index.

Description based on print version record.

ISBN:

9781118233856

1118233859

9781118220139

1118220137

9781119209720

1119209722

OCLC:

1028615399