not denying the consumer business at decent valuation theory. Bt in dat case, the narrative changes - thn this will nt fall under the demerger\risk arbitrage situation. If ur analysis hinges on this theory, thn the comparative set, risk analysis etc. everythng changes as a frame of reference.
The purpose of this thread is to uncover pure special situations whr the returns for a specific timeframe, typically 18-24 months can be mathematically calculated on an IRR basis. Hence, my example set was different from the ones u mentioned.
@Shawn_Lopes had put this thread specifically for that purpose & I connected with him to filter out situations based on these calculations. Risk arb as a branch of value investing requires different mindset & set of analysis tools vs. the more of buy-monitor & hold on type of investing. The initial price paid plays a lot more imp role here than the qualitative aspects u mentioned.
To further elaborate my point, let me give an e.g that’s migrated frm risk arb to buy & hold bcoz its a subjectively assessed stronger case. - Meghmani
The risk arbitrageur returns hinged only on calculating rough valuation of the 2 businesses, handicap the odds of demerger going thru & then buying at some discount to the perceived unlocked value. Basically, we bought Meghmani pre-demerger, & sold out whn both the businesses listed separately & reached some standard valuations, say 10X EBITDA.
The buy-&-hold thesis comes now for Meghmani Finechem - Ppl are valuing & paying for business growth, deleveraging, higher future volume growth expected etc. - The Arbitrageur left the table early, but thn his analysis didn’t covered this part to begin with.
Similarly, in this case the question is that how mch IRR will be generated in buying Forbes co. now & waiting till the period Eureka Forbes gets demerged & listed separately.That’s it!!!
If I have to invest in Eureka Forbes ( not Forbes Co. ) thn I’ll probably wait to get it listed, assess the business strength vis-a-vis valuation & my investment timeframe & thn probly buy it.