1. Profitability and Characteristics of Risk Arbitrage: Evidences from Leveraged Buyouts in the U.S. Sue Fung Wang, Kehluh Wang, Chiu Nan Tsai National Chiao Tung University Discussed by Keng-Yu Ho National Taiwan University December 11-12, 2008 NTU International Conference on Finance

2. Risk Arbitrage of LBOs2008 NTU International Conference on Finance 2 Summary of the Paper The determinants of risk arbitrage profit, specifically spread returns. U.S. LBOs from 1991-2006, with 234 successful deals and 65 failed deals. Annual average risk arbitrage return of 20%. Spread return is positively related to offer duration and bid premium but negatively related to price revision. Reversal of target firm price is positively related to P/B ratio.

3. Risk Arbitrage of LBOs2008 NTU International Conference on Finance 3 Review Comments What makes LBOs special? –Private transaction. –Cash offer. –Less hostile. –Higher rate of success. Compare LBO results to general M&A results. Motivation could be more focused. The definition of revision return… –Based on the example, would it be plus or minus 10%?

4. Risk Arbitrage of LBOs2008 NTU International Conference on Finance 4 Review Comments More control variables in the model. Sub-sample analysis. –Before and after 2000. Further extension… –Corporate governance.