The partners debated hiring a risk-arbitrage specialist but didn’t. Meanwhile, Hilibrand bought deal stock after deal stock. And he confidently bought them in very big size, despite the growing discomfort of a half dozen of his partners. Scholes and Merton argued that merger arbitrage—particularly on such a scale—was excessively risky for the obvious reason that Long-Term was playing in a field in which it had absolutely no expertise. Meriwether and his traders knew the bond world inside out. In merger arbitrage, J.M. had no edge; indeed, it was Long-Term’s rivals who had the advantage.
