M&A activity,Termination rate, Risk arbitrage spread,Percentage of deals trading above terms and market sentiment, Assumptions

1. M&A activity and risk arbitrage
Monthly report
Risk Arb by OFI
Follow us on and
JANUARY 2015

2. Table of contents
Risk Arb by OFI 2
M&A activity
Termination rate
Risk arbitrage spread
Percentage of deals trading above terms and market sentiment
Assumptions
3
4
5
6
7

3. M&A activity
Risk Arb by OFI 3
NORTH AMERICA EUROPE
Source: OFI AMSource: OFI AM
0
100
200
300
400
500
600
600
800
1000
1200
1400
1600
1800
2000
2200
USDbn
Deal value (quarterly - right axis) S&P 500 (left axis)
0
100
200
300
400
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
5500
EURbn
Deal value (quarterly -right axis) SX5E (left axis)

4. Termination rate
Risk Arb by OFI 4
NORTH AMERICA EUROPE
Source: OFI AMSource: OFI AM
average
- 1σ
+ 1σ
0%
5%
10%
15%
20%
25%
average
- 1σ
+ 1σ
0%
5%
10%
15%
20%
25%

5. Risk arbitrage spread
Risk Arb by OFI 5
NORTH AMERICA EUROPE
Source: OFI AMSource: OFI AM
- 1σ
+ 1σ
average
0%
5%
10%
15%
20%
25%
average
- 1σ
+ 1σ
0%
5%
10%
15%
20%
25%

6. Percentage of deals trading above terms and market
sentiment
Risk Arb by OFI 6
NORTH AMERICA EUROPE
Source: OFI AMSource: OFI AM
average
- 1σ
+ 1σ
0%
10%
20%
30%
40%
50%
60%
70%
Bull
Bear
average
- 1σ
+ 1σ
0%
10%
20%
30%
40%
50%
60%
70%
Bull
Bear

7. Assumptions
● Data are extracted from our proprietary database MAGMA
● MAGMA contains in excess of 2,400 M&A deals in North America and 1,400 in Europe over the
1998 to 2015 period:
• We have only taken deals with an enteprise value above $500m in North America and €300m in Europe.
• We have eliminated deals that cannot be arbitraged: stock with poor liquidity, unclear bid details, bids for
less than 100% of the capital.
● Termination rate
• (Number of failed deals that generate a loss for the arbitrageur divided) / (number of completed or failed
deals).
• Calculated on a monthly basis using a 12 month rolling average.
● Risk arbitrage spread
• Average annualised risk arbitrage spread less the risk-free rate over a 5 day period following the
announcement.
• Calculated on a monthly basis using a 6 month rolling average.
● Percentage of deals trading above terms
• (Number of announced deals with a negative risk arbitrage spread as defined above) / (number of
announced deals)
• Calculated on a monthly basis using a 12 month rolling average.
Risk Arb by OFI 7