What role do hedge funds take when they speculate on merger activity by buying stock of firms that are "in play"?

Question

Quizplus · Accepted Answer

Hedge funds specialize in taking on the risk that the deal will fall through and allow risk-averse investors to cash out. When hedge funds buy stock of firms that are "in play", they are essentially betting on the success of the merger or acquisition. This allows other investors who are not willing to take on that risk to sell their shares and cash out, while the hedge fund bears the risk of the deal falling through.

What Role Do Hedge Funds Take When They Speculate on Merger