In Gloomy Deal Arbitrage, a Rare Bright Spot Emerges
Emerson Electric’s pursuit of National Instruments could brighten the prospects for those who bet on mergers.
Emerson is a motivated buyer.
Photographer: Rafael Henrique/SOPA Images/LightRocket/Getty Images
Merger arbitrage is a tough business. To get paid, a lot needs to go right; almost nothing has recently. That could start to change this week when National Instruments Corp. fields first-round takeover bids in one of the slowest auctions of modern times.
For the uninitiated, merger arbitrage is a strategy that makes money by betting on deals. Usually that means buying shares of soon-to-be-sold companies and pocketing the difference between the purchase price and the sale price when the deal closes. This difference, or spread, reflects the risk the deal will be delayed, renegotiated or die. The higher the risk, the wider the spread.