Merger Arbitrage, also known as risk arbitrage, is a strategy that simultaneously buys and sells the stocks of two merging companies (the potential possibility that in the near future there will be a merge or a hostile takeover). It is based on the overestimation or the undervaluation between those companies. Most often ETFs basing on this strategy take long position on the companies which might be taken over and a short position on the companies which will take over the former. Merger Arbitrage is a risky strategy, there is always a possibility that the transaction may not go through. For instance, a company may not be able to satisfy the conditions of the merger or the transaction can be blocked by the government for regulatory issues. Regarding to this, the ETFs are diversified as to the level of the risk they can take. Some of them are investing only when a company issues an official statement concerning taking control over another company. It is a strategy dedicated to the experienced investors who are willing to accept the high level of risk.