A merger arbitrage spread is the gap between a cash offer and the target's share price, divided by that price: (offer − price) ÷ price. On its own, that number tells you almost nothing. Pacira BioSciences ($PCRX) closed at $36.40 on November 2, 2026, against Viatris's $36.50 cash offer, a gross spread of 0.27%. To judge it, you need three more steps: annualize it to the expected close, add any dividends due before closing, and weigh it against the drop back to the pre-deal price if the deal breaks. Below is the full calculator, run on three pending all-cash US deals.
Step 1: The gross spread
The formula is short: gross spread = (offer price − current price) ÷ current price.
Here it is with the November 2, 2026 closes:
- Pacira ($PCRX): ($36.50 − $36.40) ÷ $36.40 = 0.27%.
- CCC Intelligent Solutions ($CCC): ($7.75 − $7.68) ÷ $7.68 = 0.91%.
- Bumble ($BMBL): ($6.05 − $5.97) ÷ $5.97 = 1.34%.
The gross spread is what the market charges to carry deal risk from now until the cash arrives. A wider spread isn't automatically a bargain. Sometimes it just means a longer wait, or that the market sees more ways for the deal to fail.
Step 2: Annualize it to the expected close
A 1% gross spread earned in one month is a very different trade from 1% earned over a year. The standard fix is simple annualizing:
Simple annualized spread = gross spread × (365 ÷ days to close)
Pacira is the cleanest case. Viatris's tender offer is scheduled to expire at the end of the day on November 16, 2026, subject to extension, according to Pacira's Schedule 14D-9. That is 14 days from the November 2 close, so 0.2747% × (365 ÷ 14) = 7.16%. The deal press release only says the transaction is expected to close "by the end of 2026." If it runs to December 31, the same 10 cents is earned over 59 days, which works out to 1.70% annualized. The dollars are identical, but the annualized figure is about a quarter of the earlier one.
A note on compounding. The compounded version, (1 + gross spread)^(365 ÷ days) − 1, turns Pacira's 14-day case into 7.41%. That figure assumes you could roll into an equally safe, equally short deal every two weeks for a year. You can't, so treat the simple number as the realistic baseline and the compounded one as a ceiling.
Step 3: Add dividends paid before closing
If the target keeps paying its regular dividend while the deal is pending, the holder collects it on top of the offer. The formula becomes:
Gross spread with dividends = (offer + dividends with ex-dates before closing − price) ÷ price
Take a hypothetical $50 cash offer for a stock at $48 that pays one $0.50 dividend before closing. The spread rises from 4.17% to 5.21%. Two checks matter here. First, count only dividends whose ex-date falls before the expected close. Second, read the merger agreement to see whether regular dividends are permitted while the deal is pending. For our three examples the term is zero: Nasdaq's dividend history pages list no dividends for $PCRX, $CCC or $BMBL.
Step 4: Price the downside if the deal breaks
The usual stand-in for the break price is the unaffected price, meaning the last close before news of the deal reached the market. Downside = current price − unaffected price.
Finding that date takes some care. Bumble announced its deal on the morning of October 13, 2026, but its press release measures the 138% premium against the October 9 close of $2.54. The stock had already jumped to $3.80 on October 12. CCC is a sharper case. Its October 15, 2026 press release dates the unaffected price to July 9, 2026 ($5.38), "the last trading day prior to media speculation." The close on October 14, the day before the announcement, was $7.64, and that price already reflected months of takeover talk.
Even the correct unaffected price is an old snapshot. Since that date, the market, the sector and the company's own results have all moved. Treat the break price as an estimate, not a floor.
Step 5: The implied deal-completion probability
If a stock can only end up at the offer or the break price, its current price is a weighted average of the two: price = p × offer + (1 − p) × break. Solving for p gives:
Implied probability = (current price − break price) ÷ (offer price − break price)
For Pacira: ($36.40 − $25.20) ÷ ($36.50 − $25.20) = $11.20 ÷ $11.30 = 99.1%. Seen as a bet, a buyer at $36.40 is risking $11.20 to make $0.10, a 112-to-1 ratio.
The formula ignores the time value of money, any chance of a higher bid, and any renegotiated price. It is a quick reading of market sentiment, not a forecast.
Three live all-cash deals, side by side
Deal prices and timing below come from each target's SEC filings. Prices are Nasdaq daily closes. Where a filing gives only a quarter or an outside date, the assumed date is noted.
| Deal | Cash offer | Nov 2, 2026 close | Gross spread | Assumed close (days) | Simple annualized | Unaffected close | Downside | Implied probability |
|---|---|---|---|---|---|---|---|---|
| $PCRX (Viatris tender offer) | $36.50 | $36.40 | 0.27% | Nov 16, 2026 tender expiration (14) | 7.16% | $25.20 (Oct 7, 2026) | −$11.20 (−30.8%) | 99.1% |
| $CCC (GTCR/Elliott) | $7.75 | $7.68 | 0.91% | Mar 31, 2027, assumed end of "first quarter of 2027" (149) | 2.23% | $5.38 (Jul 9, 2026) | −$2.30 (−29.9%) | 97.0% |
| $BMBL (Ithaca Holdings) | $6.05 | $5.97 | 1.34% | Jul 12, 2027 End Date; no expected close stated (252) | 1.94% | $2.54 (Oct 9, 2026) | −$3.43 (−57.5%) | 97.7% |
A few notes on the table. Pacira's Hart-Scott-Rodino waiting period expired on October 29, 2026, per the 14D-9, leaving the minimum tender condition, a majority of outstanding shares, as the headline hurdle. That helps explain the thin 0.27% spread. Bumble's majority holders approved the deal by written consent right after signing, according to its October 13, 2026 8-K. Its remaining conditions include HSR clearance and a 20-day wait after the information statement is mailed. Bumble's filings give no target date, only the July 12, 2027 End Date. If you pull that in to March 31, 2027, the annualized figure jumps from 1.94% to 3.28%. CCC still needs a stockholder vote and regulatory approvals. For deal background, see our coverage of the $36.50 Pacira buyout, CCC's take-private and Bumble's $1.3 billion deal.
Common mistakes in spread math
- Annualizing a tiny spread over a long, uncertain timeline. CCC's 2.23% depends on a quarter-end date we assumed ourselves. Using the April 14, 2027 Termination Date in the merger agreement instead, it falls to 2.04%. The opposite trap is just as common: Pacira's 7.16% rests on a 14-day window, and one tender extension would shrink it.
- Ignoring break-price risk. All three deals carry implied probabilities between 97% and 99%. Bumble's downside is 57.5% of its November 2 price. Use the wrong break price and the math falls apart: plug in CCC's October 14 close of $7.64 and the formula returns an implied probability of 36%, which makes no sense.
- Ignoring regulatory timelines. UniFirst's 10-K shows how far a review can stretch the calendar. The FTC issued a Second Request on June 11, 2026. A timing agreement bars closing before December 11, 2026, and the outside date of January 10, 2027 can be extended to September 10, 2027. UniFirst holders also receive $155.00 in cash plus 0.7720 Cintas shares, so the deal doesn't fit a pure-cash calculator at all (see our Cintas/UniFirst spread coverage).
Other pieces in this batch cover HSR timing, tender offers versus shareholder votes, take-private mechanics and exchange ratios. More breakdowns live in the Analysis section of What's On Finance.
Bull/Bear Verdict
Bull Case: The five-step calculator turns a headline premium into numbers you can compare. It shows the gross spread, the annualized return to a clearly labeled date, the dividend adjustment, the dollar downside and the probability the market is implying. Run on Pacira, CCC and Bumble as of November 2, 2026, it shows that small spreads and 97%–99% implied odds go hand in hand.
Bear Case: Every output depends on two guesses: the closing date and the break price. A slipped timeline or a stale unaffected price can turn 7% into under 2%, or 97% odds into nonsense. The formula also leaves out financing costs, time value and the chance of a higher bid.
FAQ
How do you calculate a merger arbitrage spread?
Subtract the current share price from the cash offer and divide by the current price. Pacira on November 2, 2026: ($36.50 − $36.40) ÷ $36.40 = 0.27%. Then annualize it to the expected close and add any dividends due before closing.
Why is Pacira's spread so much thinner than Bumble's?
Time and conditions. Pacira's tender offer was set to expire on November 16, 2026, and its HSR waiting period had already expired. Bumble's filings give no target date, only a July 12, 2027 End Date, so its 1.34% gross spread is spread over many more months.
What does the implied deal-completion probability actually measure?
It measures where the current price sits between the break price and the offer: (price − break) ÷ (offer − break). It assumes only two outcomes and ignores time value, so it reflects market sentiment, not a prediction.
Does the same math work for stock-for-stock deals?
Not directly. When part of the payment is acquirer stock, as in UniFirst's $155.00 plus 0.7720 Cintas shares, the offer value moves every day. The spread then depends on the exchange ratio and on hedging the acquirer's shares.