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What was the average merger arbitrage spread each year between 2007-2017
Hello! Thanks for your question about the average merger arbitrage spread for each year between 2007-2017. Although we extensively reviewed all available sources, there were no precompiled data available to the public on the average merger arbitrage spread for the years requested; nor were data present that allowed for us to triangulate the requested data for you. This may be because this data is highly distinct and valuable, and much of the information needed for it requires some form of membership or payment for access. However, we were able to locate the M&A Market report which contains the total number of arbitrage transactions, as well as the total value of those transactions from 1985-2017. We have used this data to calculate the average arbitrage transaction amount for 2007-2017 and have presented that in this response as you may find it useful. The short version is that the average value of arbitrage transactions spanned from $785 million in 2007 to $559 million in 2017. The highest average arbitrage transaction during that period was $1.04 billion in 2015. All results are available within the attached spreadsheet for your perusal. Below is a deep dive into the research.
METHODOLOGY
We researched corporate websites, industry reports, trusted media sites, and academic websites for the relevant information and found that the average merger arbitrage spread for 2007-2017 was not available mainly due to the proprietary potential of the data. We reviewed additional data sources in order to try to compute the average merger arbitrage spread using raw data but some data needed for that computation was also restricted behind pay walls. We did locate some of the required data but it, too, was restricted as it was housed within the Perdue University Library portal. After an exhaustive review, we determined that the data you requested was not precompiled or available to the public; and what was available did not allow for complete triangulation. As a result, we have compiled the average value of arbitrage transactions from 2007-2017 within the attached spreadsheet. The information within the sheet is calculated using data from the M&A Market report and calculation formulas that you can review in each cell of the spreadsheet.
Helpful Findings
While we could not find a direct answer to your question, we were able to gather some information about this topic, which may be helpful to your project:
1) A report by Reuters notes that the average arbitrage spread of "15 big merger deals" in the U.S. is 9%. This average is higher than usual.
2) Orrico estimates "the long term average for all merger spreads at 3 to 5 percentage points above Treasury bill rates which are currently around 0.2%."
3) Reuters predicts that wide arbitrage spreads translate to "strong doubts" and risk in owning target company shares. They also report that "investors who buy now hoping to profit may find that a scuttled deal drags the stock down lower."
Possible continued research
In understanding what types of information are and are not publicly available on this topic, it may be fruitful to review reports analyzing already estimated arbitrage spreads and compiling qualitative information within those analyses that point to the reasons behind currently estimated arbitrage spreads and predicts future deals.
Conclusion
To wrap it up, after searching extensively through corporate websites, academic websites, industry reports and trusted media sources, we were not able to find your requested data although we were able to triangulate the average value of arbitrage transactions. All triangulated data is housed within the attached spreadsheet along with calculation formulas.
Thanks for using Wonder! If you’d like to continue research on the topic I’ve outlined above, just let us know!