Event-Driven Opportunities
Our event-driven investment approach specializes in identifying and capitalizing on pricing inefficiencies created by corporate actions, regulatory changes, and market dislocations.
With decades of experience across mergers, spin-offs, bankruptcies and other special situations, our team brings unique expertise in assessing legal, regulatory and financial factors that create temporary mispricings in securities.
Strategic Event-Driven Investing
Our strategy focuses on corporate events that create pricing inefficiencies in securities. These special situations occur when companies undergo structural changes that temporarily distort valuations, creating opportunities for informed investors to capitalize on the eventual price correction.
We invest in these opportunities because they offer asymmetric risk/reward profiles with returns that are largely uncorrelated to broader market movements. Our approach combines deep fundamental analysis with precise timing around catalyst events to generate alpha regardless of market direction.
Client Benefits
- Strengthening investments through low market correlation
- Enhanced risk-adjusted returns from defined catalyst timelines
- Access to specialized opportunities not available through traditional strategies
Our team brings decades of experience analyzing and executing across the full spectrum of corporate events, from routine mergers to complex bankruptcies. We combine legal, regulatory, and financial analysis to identify mispriced securities where the market has either overestimated risks or underestimated the probability of a favorable outcome.
Types of Corporate Events We Target
Event-driven strategies seek to profit from pricing inefficiencies created by corporate actions. Each event type presents unique opportunities and requires specialized analysis.
Cash Mergers
In cash mergers, we identify the spread between the current market price and the acquisition premium. Our strategy involves purchasing shares of the target company while assessing deal completion risk.
Key Considerations:
- Regulatory approval likelihood
- Financing conditions
- Breakup fees and deal protections
- Time to completion
Stock Mergers
For stock-for-stock mergers, we often establish spread trades by purchasing the target's shares while shorting the acquirer's stock. We monitor the convergence as the deal progresses.
Key Considerations:
- Exchange ratio fluctuations
- Relative valuation dynamics
- Hedging requirements
- Collateral optimization
Divestitures & Spin-offs
Spin-offs often unlock hidden value as separated entities can operate more efficiently. We analyze the standalone valuation potential and may position in the parent company pre-spin.
Key Considerations:
- Separation completeness
- Management quality of new entity
- Capital structure appropriateness
- Forced selling pressure
Bankruptcies & Restructurings
We analyze distressed companies to identify mispriced securities where recovery values exceed current prices. This includes senior debt, trade claims, and post-reorganization equity.
Key Considerations:
- Enterprise value versus liabilities
- Management incentives
- Creditor committee dynamics
- Liquidation versus going concern value
Event-Driven Sub-Strategies
Our approach combines specialized expertise across the full spectrum of event-driven opportunities.
Merger Arbitrage
Investing in arbitrage opportunities after deal announcements, focusing on the spread between current prices and deal terms.
Special Situations
Capitalizing on valuation disparities from corporate actions like spin-offs, special dividends, or regulatory changes.
Credit & Distressed
Targeting stressed and distressed credit situations where recovery values are mispriced relative to fundamentals.
Activism
Engaging with management and boards to catalyze value-creating events through strategic or operational changes.
Restructuring
Identifying attractive situations where capital structure changes or operational improvements can unlock value.
Niche Arbitrage
Exploiting pricing anomalies in specialized situations like SPACs, stub trades, or share class arbitrage.
Event-Driven Strategies Through Market Cycles
Different corporate events become more or less attractive depending on the economic environment. Our approach adapts to these cycles.
M&A activity increases, more stock mergers, activist campaigns rise
Distressed opportunities emerge, bankruptcies increase, forced selling creates value
Restructurings complete, spin-offs increase as companies refocus, special situations abound
Cash mergers become prevalent, private equity activity increases, niche arbitrage opportunities appear
Event-Driven Investment Strategies
Our event-driven approach capitalizes on pricing inefficiencies around corporate actions to generate returns with low correlation to traditional markets.
Merger Arbitrage
Cash Mergers
When an acquirer offers cash for the target company's shares, we analyze the spread between the current market price and the acquisition price. Our team assesses regulatory approval likelihood, financing conditions, and shareholder approval probabilities to determine appropriate position sizing.
The typical risk/reward profile shows limited upside (the spread) but larger downside if the deal fails, requiring careful risk management through position limits and hedging strategies.
Stock Mergers
In stock-for-stock mergers, we often establish spread trades by purchasing shares of the target company while simultaneously shorting the acquirer's stock. This hedges against market movements while maintaining exposure to the deal spread.
Our quantitative models track the exchange ratio fluctuations and hedge ratios to optimize position management throughout the deal timeline.
Special Situations
Spin-offs & Divestitures
Corporate spin-offs often create value as separated entities can operate more efficiently. We identify parent companies likely to spin off undervalued assets and establish positions prior to the separation.
Post-spin, we analyze the capital structures and management incentives of both entities to determine optimal allocation between the parent and spun-off company.
Restructurings
During corporate restructurings, we analyze debt and equity securities to identify mispriced claims. Our legal team works closely with analysts to evaluate reorganization plans and recovery values.
We particularly focus on situations where creditors may receive equity in reorganized entities, often providing attractive risk-adjusted returns when properly analyzed.
Credit Event & Distressed Strategies
Our distressed investment approach targets companies undergoing financial restructuring or bankruptcy proceedings.
Bankruptcy Investing
Pre-Petition Analysis
We identify companies likely to enter bankruptcy and analyze their capital structures to determine which securities offer the best risk/reward. Senior secured debt often provides the most protection during restructuring.
Plan Analysis
Once a company files, we thoroughly evaluate the reorganization plan, focusing on recovery rates for different creditor classes. Our legal team assesses plan feasibility and potential objections.
Post-Reorganization Equity
We frequently participate in rights offerings or acquire claims that will convert to equity in the reorganized company, particularly when the new capital structure appears sustainable.
Risk Management Framework
Position Sizing
We limit any single distressed position to 2-5% of capital, recognizing the binary outcomes common in bankruptcy situations. Larger exposures require committee approval.
Timing Considerations
Bankruptcy processes can take years. We model multiple timeline scenarios and their impact on IRR, ensuring adequate liquidity throughout the holding period.
Hedging Strategies
Where possible, we hedge industry and market exposures using sector ETFs or credit default swaps to isolate the specific event risk we're targeting.
Event Opportunities Across Market Cycles
Different corporate events become more prevalent and attractive at various stages of the economic cycle.
Economic Peak
- •Leveraged buyouts increase
- •Strategic M&A activity peaks
- •Share buybacks accelerate
Focus on cash mergers with strong financing
Early Recession
- •Distressed situations emerge
- •Debt refinancings become challenging
- •Dividend cuts and asset sales begin
Identify potential bankruptcy candidates early
Late Recession
- •Bankruptcy filings peak
- •Debt-for-equity swaps increase
- •Creditor negotiations intensify
Target senior secured debt with strong recovery prospects
Recovery
- •Restructurings complete
- •Spin-offs increase as companies refocus
- •Special dividends and recapitalizations occur
Capture post-reorganization equity upside
Let's Build a Partnership That Performs
If you're seeking a more engaged, accountable, and performance-driven investment partner, we invite you to start a conversation with our team.
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