A shifting fiscal regime and strong sector dynamics are likely to bode well for Merger Arbitrage in 2018, according to the latest Weekly Brief from Lyxor’s Cross Asset Research team.

The backdrop is favourable, with US assets ageing, digitalisation soaring, low funding costs remaining low and executive confidence still strong.
 
Lyxor writes: “The tax reform should support the corporate activity amid companies’ tax savings and repatriated foreign cash. Consolidation will be another key theme: TMT, Healthcare and Industrials are facing structural shifts.”
 
“Multiple themes (political pressures, antitrust risk, elevated valuations, etc) suggest 2018 will not be short of complex deals that are the playground for Merger Arbitrage specialists.”
 
“In the near-term, returns might be more moderate after spread compressed to around 5 per cent. Also, the current set of tradable deals so far includes a limited number of complex situations. We remain O/W.”