Merger Masters: Tales of Arbitrage

Nobody does better interviews with Wall Street’s top money managers -- more vigorous, revealing and timely -- than Kate Welling, publisher and editor of the subscription service Welling on Wall St. Working as the Managing Editor of Barron’s, alongside the legendary Alan Abelson, and for many years on her own, Ms. Welling has set the highest standards for this type of journalism. Her work is consistently fine — illuminating and often excitingly fresh. The niche on Wall Street known as merger or risk arbitrage has been at the center of the upending of corporate America since the takeover craze erupted in the ‘70s and ‘80s. (A good introduction to the craze itself is Bloodsport: When Ruthless Dealmakers, Shrewd Ideologues and Brawling Lawyers Toppled the Corporate Establishment, by Robert Teitelman.) Ms. Welling’s book, Merger Masters: Tales of Arbitrage, is a fascinating look at the some of key players in this niche, and probably in an unintended way, inasmuch as Mario Gabelli, the co-author of the book who is credited with coming up with the idea for it, is a proud practitioner of the “art.” Because what is fascinating to me is the huge difference between the few interviewees who appear to have done risk arbitrage in the classic (and classy) way, such as Michael Price, and the many others who might be called practitioners of the activist school who, arguably, have been wreaking havoc — in ways that Ms. Welling brilliantly illuminates in interviews with three exceptional CEOs — William Stiritz of ConAgra, Paul Montrone of Fisher Scientific, and Peter McCausland of Airgas — who were caught in the vortex of the Arbs, so to speak, in the context of attempted unfriendly takeovers. Their stories raise large, important issues that Mr. Gabelli, in his Introduction, doesn’t even mention. My only regret about the book is that two particular persons were not around to be interviewed: Stanley Schiff, who ran the arbitrage desk at Drexel, Burnham when Michael Milken was there and somewhat single handedly created (or enabled) the above-mentioned Bloodsport, and Murray Lerner, my father, who taught Stanley the business of convertible arbitrage. Finally, the biggest surprise of the book, for me, was the revelation of why Guy Wyser-Pratte published in 1971 Risk Arbitrage, in which he publicly disclosed how just about anyone could play in the game (it’s not that difficult, really) which, up until then, had been shrouded in secrecy. It appears he was a young outsider trying to get even with the exclusionist insiders.

"Merger Masters is the best business book of the year. I had the pleasure and privilege of reading an advance draft and suggesting a very small handful of quick edits for Kate, who is a great friend and the best financial journalist extant. Mario Gabelli worked his network of fellow practitioners and business execs to allow Kate to do her thing and interview the best of the best in the merger arb arena. If you are a student of investment history, or want to better understand the practice of arbitrage, or simply want to enjoy a great investment and business book, then buy a copy." Chris Bloomstran, Semper Augustus Investments Group 2018 Yearend Letter

Here is an example of one of the many great nuggets of wisdom from Merger Masters: “According to (Michael) Price, the key is ‘having the judgement to act. Any young MBA can do the math. But you need judgement, experience to know when to get involved. Even then, no one is right all the time, so part of risk arb- and all investing- is managing losses, and that goes first to position sizing.”

Book arrived on time and in good condition

A good read. Found it interesting and great thought process on the numerous deals the book goes over.