Merger arbitrage is an investment strategy that profits from price convergences resulting from corporate events, specifically mergers and acquisitions (M&A). This thesis explores the intricacies of merger arbitrage, focusing on its potential for achieving risk-adjusted returns in advanced financial markets. By examining the theoretical framework of merger arbitrage, this study seeks to explain the mechanics of the strategy and the factors that influence its profitability. A comprehensive empirical analysis of select companies is conducted to evaluate their financial performance following merger announcements. Furthermore, the study sheds light on the impact of M&A events on the stock prices and Cumulative Abnormal Returns (CARs) of target and acquiring firms, which were found through an event study. The analysis uncovers notable variations among target companies, further providing insights into market reactions following merger announcements. A detailed case study of Miromatrix Medical Inc. (MIRO) and Hawaiian Holdings Inc. (HA) provides an understanding of the dynamics of M&A transactions and their implications for involved stakeholders. Overall, this thesis seeks to contribute to the vast existing body of literature on merger arbitrage by offering empirical evidence and insightful analyses of real-world merger events.
