Where merger arbitrage meets convertibles

Paul Glazer discusses the convergence of merger arbitrage and convertible bonds as a driving force behind his firm's conviction-led investment strategy. At the helm of Glazer Capital, Glazer oversees three primary investment approaches: merger arbitrage, SPAC arbitrage, and convertible arbitrage. While the first two strategies have a discernible conclusion, convertible arbitrage exhibits a longer-term horizon, typically maturing within three to five years.

The founder, CEO, and CIO of the firm emphasizes the significance of creating "synergy" across all investment teams, as he believes in making substantial profits on every position held. The global M&A deal value is anticipated to reach approximately $4tn, increasing by 13% year-on-year, according to PWC. This growth can be attributed to the more accommodating regulatory landscape in the US, which has spurred deal activity.

A staggering 95% of signed merger agreements in the United States culminate in completed deals, with the remaining 5% encountering regulatory or legal obstacles that may not yield returns. Furthermore, other regions, such as Europe and APAC, are gradually adopting more lenient regulatory conditions in response to the evolving US environment.

The firm has recently established a London office to capitalize on this burgeoning opportunity set and to bolster its human resources on the ground. Notably, the firm has observed a surge in convertible bond issuances in recent years, including those from companies like DoorDash, On Semiconductor, and Ciena, which are either investment grade or near-investment grade.

This development presents a favorable opportunity for the firm, as these bonds exhibit high volatility and are associated with creditworthy issuers. As merger deals continue to top $10bn, the firm anticipates an expansion of fertile sectors, such as biotech and pharmaceuticals, providing new investment avenues. With the addition of a dedicated technology team to its merger arbitrage team, Glazer remains optimistic about the firm's continued growth and the exploitation of market dislocations.