Merger arbitrage hedge funds, which bet on the likelihood of corporate mergers and acquisitions closing, could benefit from the relentless rise of the dollar against the the yen, the euro and sterling, according to a report in the Financial Times.
The strength of the dollar has boosted the buying power of investors with Greenback funding allowing them to potentially acquire foreign companies for lower cost than previously. One private equity executive even went so far as to state recently that “everything in the UK is on sale”.
The report quotes Pierre di Maria, head of event-driven at Cheyne Capital in London, as saying that he expects to see an increase in UK M&A activity on the back of sterling weakness.
Felix Lo meanwhile, a former Millennium trader who now runs a merger arb fund at Trium Capital, has built a screening tool to monitor the effect that these currency moves are having on cross-border deals. He expects US firms to be active saying that “US CEOs are the most bullish and eager to do deals”.
