Case | HBS Case Collection | October 1998 (Revised November 1999)

Farallon Capital Management: Risk Arbitrage (A)

by Andre F. Perold and Robert Howard

Abstract

Farallon Capital Management, an investment firm that specializes in risk arbitrage, has taken significant long and short positions in MCI Communications and British Telecommunications, respectively, in the belief that the proposed merger of these firms will be successfully completed. Raises the issues facing Farallon as positive and negative events relating to the merger unfold. Provides a rich institutional setting for understanding certain investment strategies involving short selling, and for understanding merger arbitrage and its function in the capital markets.

Keywords: Mergers and Acquisitions; Capital; Capital Markets; Investment; Management; Risk Management; Strategy; Financial Services Industry;

Citation:

Perold, Andre F., and Robert Howard. "Farallon Capital Management: Risk Arbitrage (A)." Harvard Business School Case 299-020, October 1998. (Revised November 1999.)