MERGER MANIA: Arbitrage: Wall Street's Best Kept Money-making Secret

Sound, unsentimental advice on the risks and rewards involved in playing the takeover game, which affords perhaps the most visible and exciting investment opportunities now available. Boesky is a so-called risk arbritrageur who bids for acquisition targets he believes are undervalued relative to their eventual worth. ""Arbs"" give the marketplace liquidity, and a few, among them Boesky, parlay their judgment calls into great wealth. In reviewing the ins and outs of his arcane trade (as much art as science), the author covers all possible applications of arbitrage techniques, e.g., to convertible securities, rights offerings, spinoffs, plus hedging tools--options, stock-index futures, et al. But his focus is firmly on merger candidates. Boesky stresses the importance of determining not only precise values and prospective returns on investment, but also whether a proposed union makes business sense. He offers a wealth of chronological case studies that provide by-the-numbers insights into the potential perils of regulatory obstacles and contested deals; not infrequently, of course, holdouts like Babcock & Wilcox wind up securing top dollar for their shareholders--and the arbs. Defenses against takeover bids in general and unsolicited tenders in particular (supermajority rules, fair-pricing procedures, divestitures, pre-emptive acquisitions, antitrust actions, et al.) get a thorough airing as does merger and acquisition law. To his credit, Boeksy does not promise quick killings or even consistent profits by use of simple formulas. Worthwhile gains, he emphasizes, depend on steady nerves, a quick-response capacity, diligent research, and constant attention to details--notably, those required by the SEC, which are explained in an informative appendix that also includes a pr‚cis of applicable Internal Revenue Code provisions. A valuable, cautionary handbook.