Merger Mania: Top 3 Arbitrage Picks for Investors in 2024


  • Though SAVE investors got crushed, other merger arbitrage plays are percolating.
  • iRobot Corporation (IRBT): A somewhat risky play, IRBT’s shares trade at a massive discount compared to Amazon’s planned purchase price.
  • United States Steel (X): Regulators haven’t said their piece yet, but buying X as a merger arbitrage play is also an investment in a quality value stock.
  • Alteryx (AYX): The “safe” bet for merger arbitrage in 2024, this private buyout offers a solid and reliable return.

merger arbitrage - Merger Mania: Top 3 Arbitrage Picks for Investors in 2024

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Merger arbitrage investors looking for quality M&A picks to eke out some gains got their collective teeth kicked in last week. However, if you’re looking for more merger arbitrage picks in 2024, don’t lose hope—there are still opportunities at hand.

Remember that merger arbitrage trades generally involve buying shares in a company that’s either a great acquisition candidate or has already announced a planned merger. In these cases, the gains come from the difference in share acquisition purchase price and what you’ve paid for them. For example, suppose you buy Company A’s shares for $9 a pop. Down the road, Company B announces an acquisition at $10 per share. Once that deal closes, you pocket the difference between your purchase price and the sale price.

Of course, this month’s hot news is the blocked M&A between JetBlue Airways (NASDAQ:JBLU) and Spirit Airlines (NYSE:SAVE). The 2022 deal included a $33.50 purchase price per SAVE share, and since the deal’s announcement, shares have traded right in the $20 range. It doesn’t take a quant to know the difference between $33.50 and $20 is fairly substantial, and investors flocked to the opportunity. However, regulators dashed their hopes as they put forth an initial deal denial on anti-competition grounds, and SAVE shares halved quickly.

Understandably, the surprise move turned many investors away from merger arbitrage deals—but there are a handful of M&A deals to be had throughout the rest of 2024.

iRobot Corporation (IRBT)

In this photo illustration the iRobot Corporation (IRBT) logo seen displayed on a smartphone screen
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iRobot Corporation (NASDAQ:IRBT) is the clearest “next big thing” in merger arbitrage stock picks, mostly because attention swarmed to the stock in light of SAVE’s conundrum. Like SAVE, Amazon (NASDAQ:AMZN) inked a deal to acquire iRobot in 2022 for $61 per share. Since then, shares hovered around $60 before slowly falling closer to $30 per share as the deal dragged. Furthermore, right on the heels of SAVE’s fiasco, European regulators started grumbling that they planned on blocking the deal, which, in turn, sent IRBT shares tumbling.

Having said that, is this a case of anti-competitive spirit in the same vein as SAVE? Or is the EU’s bark worse than its regulatory bite? The EU’s argumentative thrust is that the merger will squeeze out the robotic vacuum cleaner “little guys,” which, frankly, I didn’t know was a sizeable mom-and-pop market. But either way, remember that Amazon isn’t going into the deal for a slice of the red-hot robotic vacuum market. Instead, they’re simply seeking to score the multiple patents iRobot holds as part of their automation strategy. Whether that makes the deal more or less anti-competitive isn’t evident. Still, investors should expect Amazon’s legal team to battle mightily if the deal seems shaky.

Even if the deal falls through, iRobot shares are arguably undervalued. Though the company’s margins compressed in recent years, the company trades at just 0.51 times sales today. Subject to a stalled deal, iRobot will claw back a $94 million payout. That cash infusion will help the company reorient on a new path while keeping merger arbitrage investors afloat for the next deal.

United States Steel (X)

Steel stocks: rods, bars and other forms of steel
Source: Shutterstock

In a semi-risky but decently rewarding merger arbitrage bet, United States Steel (NYSE:X) is set for a merger with Japanese steelmaker Nippon Steel Corporation. The deal prices X shares at $55 each. That represents a 15% premium over today’s pricing. The deal is set to close “in the second or third quarter of calendar year 2024.” Considering current economic and market uncertainties, 15% returns in exchange for tying up your capital for a few months isn’t a bad deal. However, how likely is the X deal to close?

Steel union leadership claims that management didn’t consult them on the deal. The move also unites legislators across the aisle as Republicans and Democrats alike blast it as “outrageous” and equivalent to auctioning off American defense industrials to foreigners. These headwinds might prove troublesome for Nippon Steel executives as they seek to close the deal, although the same executives also point to long-term positive economic and defense-based US/Japanese relations. They also affirmed that the deal would not “shift existing production or American jobs overseas.

United States Steel is a strong value stock to buy in the long term or without a deal closing. That makes today’s per-share pricing attractive, trading at 0.97 times book value and below 10 times earnings while offering a 3.46% total yield. Buying X is worth the price today, and if the Nippon Steel deal goes through, consider it a happy surprise on top of a solid stock pick.

Alteryx (AYX)

The Alteryx (AYX) logo is displayed on a smartphone screen.
Source: rafapress /

Our final merger arbitrage is, unlike the others, closest to a “done deal” as we get without having dried ink on a closing contract. Having said that, with less risk, there’s fewer rewards at stake. Software and data analytics firm Alteryx (NYSE:AYX) is set to be acquired by private operator Clearlake Capital Group sometime in 2024’s first half for $4.4 billion. That shakes out to $48.25 per share for existing stock owners, which equates to just under 2% gains at today’s pricing. The deal will also take Alteryx private, closing out existing positions once sold and triggering (of course) a taxable event.

To rehash, the downsides are an imminent taxable event and limited margins – so what are the upsides? In this case, of course, security and safety are top billing. The deal is all but certain to go through, so there’s little risk of capital loss amid uncertainty, as we saw with SAVE and IRBT this month. And 2% isn’t bad, either – especially if the deal closes quickly.

Even if the deal doesn’t close until June, the latest estimate according to the joint press release, you’re looking at just under an annualized 5% gain. That aligns roughly with treasury yields over the same period. Taking a bet on this merger arbitrage play is a good diversification strategy to shield against wider market choppiness and act as an alternative to fixed-income investing. Furthermore, if the deal closes faster? You’re looking at as much as 24% annualized if the deal closes within a month—not too bad for a safe bet!

On the date of publication, Jeremy Flint held no positions in the securities mentioned. The opinions expressed in this article are those of the writer, subject to the Publishing Guidelines.

Jeremy Flint, an MBA graduate and skilled finance writer, excels in content strategy for wealth managers and investment funds. Passionate about simplifying complex market concepts, he focuses on fixed-income investing, alternative investments, economic analysis, and the oil, gas, and utilities sectors. Jeremy’s work can also be found at

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