A trading strategy that seeks to benefit from stock price movements driven by one company merging with or buying another company. A typical transaction involves shorting the stock of the buyer and purchasing the stock of the company being bought. The difference between the stock prices narrows as the transaction moves towards completion.
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arbitrage (n)

Business operation involving the purchase of foreign currency, gold, financial securities, or commodities in one market and their almost simultaneous sale in another market, in order to profit from price differentials existing between the markets.

In the 1980s a form of speculation called risk arbitrage arose, in which speculators tried to identify companies targeted for takeover and buy blocks of their stock, to be resold at a profit when the takeover was announced and the company's stock rose in value. See also insider trading; security.
BRITTANICA

merger:
Combination of two or more independent business corporations into a single enterprise, usually involving the absorption of one or more firms by a dominant firm.

The dominant firm may purchase the other firm's assets with cash or securities, purchase the other firm's stock, or issue its own stock to the other firm's stockholders in exchange for their shares in the acquired firm (thus acquiring the other company's assets and liabilities). In horizontal mergers, both firms produce the same commodity or service for the same market. In vertical mergers, a firm acquires either a supplier or a customer. If the merged business is not related to that of the acquiring firm, the new corporation is called a conglomerate. The reasons for mergers are various: the acquiring firm may seek to eliminate a competitor, to increase its efficiency, to diversify its products, services, and markets, or to reduce its taxes.
BRITTANICA ENCYLOPAEDIA

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Note added at 5 hrs (2007-02-07 01:59:39 GMT)
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Berdasarkan KBBI (2005),
padanan 'arbitrage' = 'arbitrase' atau 'arbitrasi'

padanan 'merger' = 'merger' (bukan 'merjer')

Menurut Shook (2002), 'merger arbitrage' = 'arbitrase merger'

Ref.:
Departemen Pendidikan Nasional. 2005. Kamus Besar Bahasa Indonesia. Edisi Ketiga. Jakarta: Balai Pustaka.

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Note added at 5 hrs (2007-02-07 02:04:06 GMT)
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Shook, RJ. (2002). Kamus Lengkap Wall Street: Sumber Acuan Istilah Keuangan Terkini. (Penerjemah Roy Sembel). Jakarta: Penerbit Erlangga.

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