The fundamental analysis is quite common for this type of strategy. It can be divided into 5 principal themes :

- a sector analysis (past & current mergers, competition, business trends, potential counter-bid, political and union issues, sector multiples)
- the pricing offer (parity, financing, repo, soft and hard options, dividend forecast, timetable)
- a legal analysis (merger agreement, regulatory issues, shareholders analysis, minorities, poison pills, litigation, class action)
- a risk analysis (stress test, scenarios)
- a fundamental analysis (balance sheet, market capitalisation, cash flows, accounting red flags, strategy, synergy, historical corporate events).

A probabilistic in-house model has been developed on a basis of more than 500 past mergers on which the investment team had positions.
This model lists all of the potential causes of deal breaking and calculates a probability of success of the offer. We also calculate a downside, a potential upside and a "fair value" i.e. a spread where the manager estimates that all the potential risks are taken into account. We compare this spread to the market price and we deduct a "trading range"; an entry zone and an exit zone for the position.
Even if the final decision is taken by the fund managers, this model is an excellent indicator and provides a dynamic portfolio; we do not hesitate to take our profit on a position instead of carrying it until the settlement date, considering that we are not paid enought to keep the risk.