By Crystal Kim

On Friday Kraft Heinz made a surprise $143 billion bid for Unilever. Kraft and Unilever shares got a lift on the news even before the market opened. Unilever rejected the bid, but Kraft is still in pursuit.

Kraft (KHC) rose nearly 11% and Unilever (UL), 14% on Friday.

If this megamerger is any indication of M&A activity in 2017, merger arbitrage strategies may be worth a look. These strategies aim to unlock the value that uncertainty around two companies’ unions tends to create.  Between the $3 billion Merger (MERFX) mutual fund, the $154 million IQ Merger Arbitrage ETF (MNA) and the tiny $3 million ProShares Merger ETF (MRGR), MNA has the best three-year performance.

Barron’s called Sal Bruno, CIO of New York-based Index IQ, to get his take on Kraft and Unilever. Given the preliminary stage of the deal, the rules-based index underlying MNA wouldn’t pick up the Kraft/Unilever deal even if it were rebalanced now (it rebalances at the first of every month), says Bruno.

Even if Unilever weren’t pushing back, which it is, the proposed company would be triple-domiciled — headquartered in the U.S., the U.K., and the Netherlands. That would require regulatory approval from three different agencies, making the likelihood of the deal holding together slimmer.

MNA has strict rules on how long they’ll hold a company. Most deals get pulled together in 90-120 days, so if a deal doesn’t happen by Day 180, the company will be booted from the index on the next rebalancing date. That helps MNA avoid deal breaks and thus, breaks in performance.

For example Office Depot (ODP) was added to MNA in early March after Staples (SPLS) announced its bid early February. Due to regulatory issues the deal dragged out and Office Depot was dropped in September. That turned out to be a good thing because the deal collapsed and in May 2016, Office Depot fell by nearly 50%.

Index IQ’s Bruno is bullish on M&A activity in 2017. He points out that 2016 was a break from record M&A in 2014 and 2015. “Valuations are high, which is good for stock acquisitions, there’s a lot of capital and the regulatory environment will be more dovish,” he says. “If we get capital repatriation, there could be a tidal wave of cash to be deployed, fueling more M&A.”

The healthcare sector, particularly insurers, consumer staples, and technology sectors could see more unions this year.