About a month ago I made a post about this M&A Arbitrage situation https://www.reddit.com/r/ValueInvesting/s/gtQtGqIn8o
[https://www.businesswire.com/news/home/20260813834323/en/Western-Union-and-Intermex-Provide-Update-on-Pending-Acquisition](https://www.businesswire.com/news/home/20260813834323/en/Western-Union-and-Intermex-Provide-Update-on-Pending-Acquisition)
The deal blocker was NYDFS approval which was accomplished today.
Graham discusses these types of special situations for active investors and outlined some pretty straightforward criteria that we can follow today.
\- Deal Status
Definitive, binding agreements only (fully negotiated, shareholder and board approved)
\- Financing
Backed by committed financing, Deal NOT subject to financing
\- Standalone Value
Target was trading below intrinsic value before the deal was announced
\- No Obvious Deal Breakers
Little/no antitrust or regulatory scrutiny
\-Remaining Duration
< 6 months
\- Annualized Return rate
\> 20%
Personal rules on position size (up to 5% of portfolio as m&a, max 2% per position)
Lessons from IMXI:
Net: 23% over a period of \~1 month
IMXI only failed in standalone value. The very high likelihood of success meant that we could fairly confidently expect to make profit in this situation. However, our original estimation of the maximal loss may have been too low, given the softening fundamentals of IMXI in q1 and 2. When WU q2 earnings released, IMXI share price dropped to \~11 per share (greater spread without greater loss size) and would've been an even more profitable play (45%). Despite the evident success, we took on a larger risk of permanent capital loss than anticipated with a potentially insufficient margin of safety. As a result, I will proceed with greater caution moving forward (either with regards to position sizing or avoiding deals with little standalone value outright).
My initial ruling on above was to limit my sizing to 1%, which I maintain as an appropriate size upon posthumous analysis.
I personally cannot predict the exact market bottom and will not lose any sleep over missing the bottom.
Let me know what you guys think about this merger as well as mna in general!
