AlphaSituations-Event/Catalyst Driven Research, AlphaSituations

Robert Sassoon

Robert Sassoon has been an equity analyst for more than twenty years focusing primarily on global special situations. Robert has worked in research for several large sell-side institutions, including Credit Suisse, Natwest Capital Markets and Societe Generale. During his career, he has achieved top 5 rankings in various analyst surveys, including the Extel and Greenwich surveys.

In 2017, Robert founded AlphaSituations, an idea-generating investment research service with the goal of delivering a unique portfolio of ideas to drive client growth and returns by uncovering compelling and highly profitable value propositions as well as lucrative shorter-term trading situations arising from select dislocating corporate restructuring events and catalysts. Currently, the main geographical focus of the research is North America. Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%.

In January 2022, AlphaSituations was contracted  by Water Tower Research,  an investor engagement and stakeholder communication platform to provide coverage of Special Situations.

AlphaSituations-Event/Catalyst Driven Research

MergerTalk: Magnachip Semiconductor Corp (MX US)-Wising Up To An Attractive Risk-Arb Opportunity

AlphaSituations

Since its establishment, AlphaSituations has delivered a track record of outperformance with a hit rate of winners of more than 70% of its portfolio of ideas generating annualized average returns of 20%. In January 2022, AlphaSituations was contracted by Water Tower Research, an investor engagement and stakeholder communication platform to provide coverage of Special Situations

Event-Driven

MagnaChip Semiconductor Corp / Event-Driven

While the vast majority of mergers and acquisitions successfully close, there is always a chance that one will not. The greater the potential issues, the greater the risk profile of the transaction and the wider the spread tends to be, and thus the greater potential profit for the merger arbitrage investor. There are typically 4 main reasons why a deal may end up in jeopardy.At the top of this list comes the risk of Regulatory/Antitrust Issues. Remedial solutions often alleviate the risks,  but there are, of course, cases where there may be little room for remedy  deemed adequate enough by regulators to overcome its anti-competitive or other concerns like national security when it comes to cross-border transactions (US Trump Blocks Lattice Acquisition for Security Risk - China Will Have to Build Its Own Now. Read more: <a href="https://skr.ma/rFdfj" target="_blank" rel="noopener">https://skr.ma/rFdfj).</a>When it comes to the latter category, there may be cases when regulatory overview enters a grey area where a  political agenda comes into play.  Although, not publicly broadcast in this way, this suspicion has become more prevalent in transactions  particularly involving  Chinese entities such as the Canyon Bridge/ <a href="https://www.smartkarma.com/entities/lattice-semiconductor-corp" target="_blank" data-smartkarma-citation="entities:7855:1" rel="noopener">Lattice Semiconductor (LSCC US)</a> case cited above or  transactions even between non-Chinese entities, which still require approval from China's regulators such as the <a href="https://www.smartkarma.com/entities/qualcomm-inc" target="_blank" data-smartkarma-citation="entities:969:1" rel="noopener">Qualcomm Inc (QCOM US)</a> / <a href="https://www.smartkarma.com/entities/nxp-semiconductors-nv" target="_blank" data-smartkarma-citation="entities:9801:1" rel="noopener">Nxp Semiconductors Nv (NXPI US)</a> deal which was effectively stopped in its tracks in 2018 by the Chinese regulatory review process.The other key risks include the prospect of  Shareholder Rejection from either the buying or target company's shareholders, which more often that not tends to occur when dissenting activists get involved (Huntsman / Clariant: M&amp;A "Acquirer" Activism - Can Corvex and 40 North Disrupt? Read more: <a href="https://skr.ma/ned3" target="_blank" rel="noopener">https://skr.ma/ned3</a> ) Material Adverse Events could lead to an abandonment of the transaction or a price renegotiation, of which there were a several examples last year in the wake of the Covid-19 pandemic (<a href="https://www.smartkarma.com/entities/simon-property-group-inc" target="_blank" data-smartkarma-citation="entities:6472:1" rel="noopener">Simon Property Group (SPG US)</a> / <a href="https://www.smartkarma.com/entities/taubman-centers-inc" target="_blank" data-smartkarma-citation="entities:11757:1" rel="noopener">Taubman Centers (TCO US)</a> ,  <a href="https://www.smartkarma.com/entities/lvmh-moet-hennessy-louis-vui" target="_blank" data-smartkarma-citation="entities:21072:1" rel="noopener">Lvmh Moet Hennessy Louis Vuitton (MC FP)</a> / <a href="https://www.smartkarma.com/entities/tiffany-co" target="_blank" data-smartkarma-citation="entities:14729:1" rel="noopener">Tiffany &amp; Co (TIF US)</a>), and  Financing Conditions which increase funding uncertainty, are the other key risks that M&amp;A transactions can typically confront. One recent example of the latter was the the 4 years plus China Oceanwide/ <a href="https://www.smartkarma.com/entities/genworth-financial-inc-cl-a" target="_blank" data-smartkarma-citation="entities:3876:1" rel="noopener">Genworth Financial Inc Cl A (GNW US)</a> merger transaction saga which ultimately collapsed despite successfully navigating challenging regulatory obstacles because of  Oceanwide's inability to fund its proposed $2.7BN acquisition of GNW.While even broken deals do not necessarily lead to broken investments as we highlighted in our insight back in November 2020 (MergerTalk:Broken Deals Do Not Necessarily Lead To Broken Investments. Read more: <a href="https://skr.ma/nKzya" target="_blank" rel="noopener">https://skr.ma/nKzya</a>), it is most advantageous to find merger arbitrage opportunities that offer a wide spread, which misprice deal failure risk or at the very least provides some sort of fundamental safety net should the deal not move to completion. These situations may not be that common, but it is those misunderstood situations which we at AlphaSituations attempt to identify. One such example of the recent past was the the <a href="https://www.smartkarma.com/entities/t-mobile-us-inc" target="_blank" data-smartkarma-citation="entities:922:1" rel="noopener">T Mobile Us Inc (TMUS US)</a> / <a href="https://www.smartkarma.com/entities/sprint-corp" target="_blank" data-smartkarma-citation="entities:921:1" rel="noopener">Sprint Corp (S US)</a> merger transaction. With Wall Street for the most part giving little odds of this transaction being able to successfully overcome the regulatory review process, we took a contrarian view at the time arguing that the outcome of this review process was far from clear-cut with various factors at play (MergerTalk: T-Mobile US/Sprint-Why This Will Close &amp; Why Sprint Shareholders Can Expect To Prosper. Read more: <a href="https://skr.ma/1RSwG" target="_blank" rel="noopener">https://skr.ma/1RSwG).</a> The merger was consummated at the end of 1Q 2020.Among the universe of live M&amp;A deals we monitor (US M&amp;A deals of  &gt;$400MN), which we list below,  there are several deals  with the potential for annualized of &gt;20%.  <h3>The Search For Compelling Spreads</h3><figure class="editor-figure mceNonEditable"><img src="https://static-prod.smartkarma.com/images/media/000/216/021/original/image_50950126721624984312205.png?1624984313" class="editor-image img-responsive" data-smartkarma-image-id="216021"></figure>Source: AlphaSituationsThere may be  several candidates in this list that deserve closer scrutiny which we intend to follow up on, but in this Insight, we update our thoughts on the Wise Road Capital/ <a href="https://www.smartkarma.com/entities/magnachip-semiconductor-corp" target="_blank" data-smartkarma-citation="entities:28052:1" rel="noopener">MagnaChip Semiconductor Corp (MX US)</a> transaction, which we believe offers the most intriguing and compelling  spread in this list.

While the vast majority of mergers and acquisitions successfully close, there is always a chance that one will not. The greater the potential issues, the greater the risk profile of the transaction and the wider the spread tends to be, and thus the greater potential profit for the merger arbitrage investor. There are typically 4 main reasons why a deal may end up in jeopardy.At the top of this list comes the risk of Regulatory/Antitrust Issues. Remedial solutions often alleviate the risks,  but there are, of course, cases where there may be little room for remedy  deemed adequate enough by regulators to overcome its anti-competitive or other concerns like national security when it comes to cross-border transactions (US Trump Blocks Lattice Acquisition for Security Risk - China Will Have to Build Its Own Now. Read more: https://skr.ma/rFdfj).When it comes to the latter category, there may be cases when regulatory overview enters a grey area where a  political agenda comes into play.  Although, not publicly broadcast in this way, this suspicion has become more prevalent in transactions  particularly involving  Chinese entities such as the Canyon Bridge/ Lattice Semiconductor (LSCC US) case cited above or  transactions even between non-Chinese entities, which still require approval from China's regulators such as the Qualcomm Inc (QCOM US) / Nxp Semiconductors Nv (NXPI US) deal which was effectively stopped in its tracks in 2018 by the Chinese regulatory review process.The other key risks include the prospect of  Shareholder Rejection from either the buying or target company's shareholders, which more often that not tends to occur when dissenting activists get involved (Huntsman / Clariant: M&amp;A "Acquirer" Activism - Can Corvex and 40 North Disrupt? Read more: https://skr.ma/ned3 ) Material Adverse Events could lead to an abandonment of the transaction or a price renegotiation, of which there were a several examples last year in the wake of the Covid-19 pandemic (Simon Property Group (SPG US) / Taubman Centers (TCO US) ,  Lvmh Moet Hennessy Louis Vuitton (MC FP) / Tiffany &amp; Co (TIF US)), and  Financing Conditions which increase funding uncertainty, are the other key risks that M&amp;A transactions can typically confront. One recent example of the latter was the the 4 years plus China Oceanwide/ Genworth Financial Inc Cl A (GNW US) merger transaction saga which ultimately collapsed despite successfully navigating challenging regulatory obstacles because of  Oceanwide's inability to fund its proposed $2.7BN acquisition of GNW.While even broken deals do not necessarily lead to broken investments as we highlighted in our insight back in November 2020 (MergerTalk:Broken Deals Do Not Necessarily Lead To Broken Investments. Read more: https://skr.ma/nKzya), it is most advantageous to find merger arbitrage opportunities that offer a wide spread, which misprice deal failure risk or at the very least provides some sort of fundamental safety net should the deal not move to completion. These situations may not be that common, but it is those misunderstood situations which we at AlphaSituations attempt to identify. One such example of the recent past was the the T Mobile Us Inc (TMUS US) / Sprint Corp (S US) merger transaction. With Wall Street for the most part giving little odds of this transaction being able to successfully overcome the regulatory review process, we took a contrarian view at the time arguing that the outcome of this review process was far from clear-cut with various factors at play (MergerTalk: T-Mobile US/Sprint-Why This Will Close &amp; Why Sprint Shareholders Can Expect To Prosper. Read more: https://skr.ma/1RSwG). The merger was consummated at the end of 1Q 2020.Among the universe of live M&amp;A deals we monitor (US M&amp;A deals of  &gt;$400MN), which we list below,  there are several deals  with the potential for annualized of &gt;20%.  The Search For Compelling SpreadsSource: AlphaSituationsThere may be  several candidates in this list that deserve closer scrutiny which we intend to follow up on, but in this Insight, we update our thoughts on the Wise Road Capital/ MagnaChip Semiconductor Corp (MX US) transaction, which we believe offers the most intriguing and compelling  spread in this list.  

MergerTalk: Intriguing US Merger Spreads - Why Magnachip Semiconductor Is At The Top Of Our List