Mergers, Acquisitions and You

Microsoft and Yahoo. Delta and Northwest. Blockbuster and Circuit City.

As an individual investor, what do merger and acquisition deals or potential "M&A" deals have to do with you and your portfolio? And how can you profit when big companies make big moves like these?

The following are several timely lessons on merger mania.

From Delta, Northwest Finally Reach Merger Deal:

Northwest NWA shareholders will receive 1.25 Delta DAL shares for each Northwest share they own, representing a premium of 16.8% based on Monday's closing price. That values Northwest shares at $3.6 billion.

The merger is expected to generate more than $1 billion in annual revenue and cost savings. One-time integration costs are pegged at $1 billion, and combined liquidity will be nearly $7 billion when the transaction closes.

Read the full article.

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From Delta Aims for a Merger That Works:

Besides combining two strong carriers, made so by massive cost-cutting that both achieved in bankruptcy, the Delta and Northwest deal is unique. That's because Delta, thanks to an unusually positive relationship with its pilots, sought to gain pilot approval before signing a transaction. That effort led to a tentative contract agreement with Delta pilots, but failed to gain support from Northwest pilots. Still, Delta says it went where no airline merger effort has gone before.

"Think of all the all mergers in the past," said Northwest CEO Doug Steenland, who will join the new carrier's board of directors. "If we had followed that traditional approach, there would have been no discussions. Substantial progress was made on both fronts, [although] the finish line wasn't crossed."

If there can be an agreement with the Northwest pilots before the merger closes, "that will be a milestone that no other airline merger has come close to accomplishing," Steenland said.

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Delta-Northwest: Happily Ever After? (Video):

Kristin Bentz and Simon Constable analyze the Delta-Northwest merger.

Watch the full video.

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They Just Don't Get Sexy Mergers! (Video):

Marek Fuchs points out why there's an obsession for airline mergers and not consumer-electronic hook-ups.

Watch the full video.

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From Blockbuster Goes After Circuit City:

"Our proposal offers Circuit City CC a significant premium to its existing stock price and creates a game-changing retail concept with a sustainable competitive advantage," Blockbuster BBI Chairman and CEO Jim Keyes said in a statement. "We believe the combination will result in a compelling consumer proposition that will drive significant revenue and margin enhancements, as well as cost synergies."

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From Microsoft-Yahoo! -- Let the Haggling Begin:

"Externally, Yahoo! YHOO is still making a good show of stating their intent to go it alone and execute on cost savings, restructuring and alignment plans," Krans said. "But there's a realization there that they are not going to generate a return to shareholders" comparable to Microsoft's MSFT offer, and the combination is the best way to make a successful run against Google GOOG and solidifying the No. 2 position."

Read the full article.

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From NYU's 'All-Star' Portfolio Scores Profits With Video-Game Stocks:

One of the most exciting aspects of the Activision ATVI-Vivendi deal, which is valued at around $18.9 billion, is that investors will now be able to put money into Blizzard Entertainment, the Vivendi subsidiary that makes a killing with its wildly popular World of Warcraft franchise.

That said, on Dec. 3, Sangani was able to cash in on the price premium the Vivendi deal created and sell off IAG's stake in Activision for $24.97 per share (up 32%).

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From Five Arbitrage Techniques Every Investor Needs to Know:

Arbitrage is a whole field of profitable investing that for too many people is quite clandestine. In this installment of the Finance Professor, I will open your eyes to what arbitrage is and explain how you might be able to profit and avoid losses via five core arbitrage techniques.

To start off, we need a working definition of arbitrage:

Arbitrage is the simultaneous purchase and sale of securities, commodities or assets in order to profit from price discrepancies, with as little risk as possible.

Please note that:

1. An arbitrage requires more than one transaction or "leg."

2. The price discrepancy does not necessarily ensure a profit.

3. The risk may be quantified as being low, but it does exist and can lead to significant losses.

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From Value Stock-Picking: How to Play the M&A Game:

One of the greatest feelings you can have as a value stock-picker is to wake up one morning, turn on CNBC or log on to TheStreet.com and discover that a stock that you bought has received an offer to be acquired or taken private. Why? Because immediately on the news, the stock usually rockets up.

The market, however, does not typically price a stock at the deal price. Why? There are risks involved between the time the offer is made and (if indeed it occurs) the time the deal closes.

Read the full article.

To stay up to date on merger and acquisitions, bookmark and visit TheStreet.com's Mergers & Acquisitions section.