Merger arbitrage: Profits, holdings, and impact on takeovers.

摘要

This research examines the role arbitrageurs play in mergers and acquisitions and the extent to which the probability of bid success and the takeover premia are related to arbitrage holdings. The sample consists of 680 offers spanning the 1992–1999 period and includes 152 collar offers, a new phenomenon of this period.; We provide evidence in a simultaneous-equations framework that arbitrage holdings of target shares are positively correlated with the probability of success, bid premia, and arbitrage returns. Consistent with theoretical arguments from Cornelli and Li (2002) and Gomes (2001), the deal success rate increases with arbitrageurs' participation. In addition, form of payment is an important factor in determining arbitrage holdings. Arbitrageurs have higher holdings in collar offers; however, they earn lower returns in those deals. Finally, the results indicate that arbitrage holdings are positively associated with both revision returns and the possibility that target firms receive subsequent bids within two years after the initial bids are terminated. Overall, we find that merger arbitrageurs play an important role in the market for corporate control.