Deal spread · Completion probability · Regulatory riskWhen a merger is announced, the target's stock typically trades at a discount to the offer price — the deal spread. This spread compensates for the risk that the deal fails. Our systems ingest every merger-related data point within hours and extract key terms: price, structure, conditions, and regulatory requirements. We model the probability-weighted expected outcome of the spread against the risk of deal failure.
Not all deals are equal. Cash deals with minimal regulatory overlap close at rates above 95%. Stock deals in concentrated industries with antitrust concerns close at far lower rates. Our models incorporate language analysis — the specificity of conditions, the presence of material adverse change clauses, and the tone of risk communications — to generate deal-specific completion probability estimates that update as new data arrives.
Regulatory review is the primary source of deal risk. Our systems track regulatory communications and related data to assess the probability and timing of approval. We model the time value of information locked in merger situations and continuously refine our analysis as the regulatory timeline evolves.