Swimming with the Sharks

If takeover artists play the role of sharks in the corporate sea, then risk arbitragers are the pilot fish who follow along and gobble up the stray morsels. What multimillion-dollar morsels these are, though. Arbitrage is the business of making profits from the price discrepancies that often turn up in financial markets. In takeover struggles, acquiring companies offer to pay more than the market price to ensure that stockholders will turn over their shares. When the so-called arbs see corporate raiders on the prowl, they buy blocks of the target firm's stock while the price is still low. They are betting...