A form ofarbitragewhich involves the simultaneous purchase ofsharesin onecompanyand theofassetsin another. This strategy is typically used in expectation of a pending announcement of a take-over by a company. Bypurchasingshares in the company that is expected to be taken over (with the anticipation thatmarket valuewill increase) andselling shortshares in the acquiring company (with the anticipation thatwill decrease), aninvestorhopes togainfrom both sides of the trade. This may also be used in situations involvingtenderoffers or reorganizations. Also known asRiskarbitrage.
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