Our analyses revolve around event-driven investment strategies, primarily ‘risk’ or ‘merger’ arbitrage, that involve taking long or short positions in the securities of publicly traded companies undergoing significant corporate change, namely 'mergers and acquisitions (M&A).
These highly specialised event driven investment strategies seek to profit from pricing inefficiencies that may occur before, during or after a corporate transaction. Event-driven investing seeks to capture low correlated, absolute returns from securities that typically do not trade on company fundamentals but rather on the expectations surrounding potential outcomes associated with specific corporate events.
Our primary focus is a specific type of event-driven investment strategy known as risk arbitrage or merger arbitrage. We undertake analysis that involves analysing publicly-traded companies that have signed definitive agreements to go through major corporate change, namely M&A. These publicly announced definitive M&A transactions include mergers, takeovers (including hostile takeovers), leveraged and management-buyouts, tender offers, minority buyouts and squeeze-outs.
Every M&A transaction entails risks for deal completion, and through rigorous analysis we strive to understand and identify these risks ahead of other investors pricing them in the marketplace. We undertake thorough due diligence and analyse countless factors that can impact an M&A deal successfully completing or failing.
Prior to companies signing a definitive merger agreement, the companies involved may publicly confirm that takeover or merger discussions are being held or speculation may surface in the press of an upcoming M&A transaction.
Many event-driven investors cbuy shares of a company which they believe will be taken over in the coming days or months, since takeover offers are typically presented at a premium over the prevailing market price. Upon announcement, the target’s stock price generally rises. Trading shares in these pre-announced M&A transactions is known as “pre-event opportunities”.
Our pre-event research involves analysing the feasibility of a potential deal turning into a definitive M&A transaction, and we screen press announcements, market rumours, sector trends and themes to identify potential investment opportunities. We carry out fundamental analysis on select potential M&A deals and determine whether the current stock price(s) of the companies affected appropriately reflects the likelihood of a firm transaction. We analyse pre-event situations based on valuation, antitrust, friendly/hostile approach, major shareholders, potential counterbidders, and political opposition, amongst other considerations.
We look for event-driven investment opportunities within all major corporate transactions, including those that may arise before, during or after M&A events. These include back-end trades (German domination agreements, US, Cayman, and Japanese appraisal rights), shareholder activism, spin-offs, capital raisings and debt restructurings. We refer to these as special situations and our analysis focuses on the potential outcomes of the specific event and any investment opportunities in the publicly-traded stocks involved.
If you are a qualified investor and would like to know more about our event-driven research services, please get in touch.