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Livewire Exclusive: M & A Activity is Heating Up

Following on from the recently announced takeover offers for Mantra Group Limited (MTR) and Property Group Limited (PLG) and so too the current tussle for control of Asia Pacific Data Centres (AJD), we thought it was worth revisiting what we look for when trading opportunities in the merger arbitrage space and why we feel it is a strategy worth pursuing.

In our experience, a strategy of merger arbitrage has not only provided us with consistently profitable trades (with a high win rate) but has done so whilst also reducing the overall volatility of our portfolio (when compared to equity markets generally.) It is true however that when takeovers fail, there is the potential for a large loss of capital and hence avoiding these failed trades wherever possible is the key to generating consistently positive returns. Over the 15 plus years that the Harvest Lane team have been trading M&A, our wins have happily far outweighed the losses and by keeping a few key things in mind and adopting a selective and systematic approach, Livewire readers will be well on the way to achieving a similar result.

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