merger arbitrage

Merger arbitrage is an investment strategy that involves buying and selling stocks of companies involved in mergers or acquisitions. When one company plans to buy another, the target company's stock often trades below the acquisition price. Investors buy the target's shares, expecting the deal to close and the stock price to rise to the agreed purchase price. They may also short-sell the acquiring company's stock if it's expected to drop post-merger. This strategy aims to profit from the price differences during the merger process, but carries risks if the deal fails or faces delays.