Merger Arbitrage
After a deal is announced, the target usually trades a little below the offer. Merger arbitrage tries to capture that gap. Here is how spreads work, real examples from 2025–26 and the risks that make the gap exist.
The spread
The deal spread is the gap between the offer and the target’s price. Buy the target at $201.70 when the cash offer is $210, and you earn about 4.1% if the deal closes. The spread pays you for waiting and for the risk that the deal falls apart.
| Deal | Target price | Offer | Spread |
|---|---|---|---|
| Electronic Arts (Sept. 29, 2025) | $201.70 | $210 cash | About 4.1% |
| Warner Bros. Discovery (Sept. 17, 2026) | $28.24 | $31 cash | About 9.8% |
| Norfolk Southern (Sept. 17, 2026) | $318.97 | About $371.30 in stock and cash | About 16.4% |
In our price data. Past performance does not predict future results.
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