On March 5, 2009, Xinyu Ji and Gaurav Jetley completed a study titled “The Shrinking Merger Arbitrage Spread: Reasons and Implications.”  The study defines merger arbitrage as “an investment strategy that involves buying shares of a firm that is being acquired . . . and in the case of a merger that involves payment in shares, also shorting the shares of the acquiring firm.”  Gaurav Jetley is a Vice President at Analysis Group, Inc., and Xinyu Ji is an Associate there.  (However, the study reflects the analyses and findings of Mr. Jetley and Mr. Ji, and does not necessarily reflect the perspectives or conclusions of Analysis Group.)  Ji and Jetley compiled data indicating that there has been a long-term reduction in profits from merger arbitrage.  However, market participants interviewed by the Hedge Fund Law Report suggested the regulatory uncertainty with respect to merger approval may be on the upswing, which may increase the returns to merger arbitrage strategies.  We discuss these competing views, and highlight an underappreciated niche in which the prospect for returns to a merger arbitrage strategy may be brightest.