Although famous arbitrageur George Soros made a career out of it, it's not easy to play the merger arbitrage game and win. When it works, you can make a tidy profit, but finding the right levers to pull hasn't been a simple task. Lately, it seems like deals have been coming apart more often than they get made, disappointing investors who had hoped to cash in when the mergers were finalized.

Look at the merger offer for Huntsman (NYSE:HUN), a specialty chemical maker that's been locked in a pitched court battle with prospective buyer Hexion Specialty Chemicals, a unit of private equity firm Apollo Management. With Huntsman's shares trading below $10 over the past month, some investors hoped they could realize gains even if the original merger price was renegotiated down.

The original agreement back in July 2007 called for Hexion to buy Huntsman for $28 a share. But this past June, Hexion argued that Huntsman's performance had deteriorated to the point at which the combined entity would be insolvent. Hexion sought to kill the buyout.

At first, it seemed that the courts might force the merger to go forward. Yesterday, however, Huntsman and Hexion announced that the parties had reached an agreement that lets Hexion off the hook and has Apollo paying Huntsman $1 billion. Huntsman shares today are down by more than half, to just $3 a share, as disappointed investors deal with a huge hit of the lost merger.

That's similar to an effort earlier this year to combine real estate investment trust (REIT) CapitalSource (NYSE:CSE) and Nebraska-based savings and loan TierOne (NASDAQ:TONE). The REIT had agreed to buy the S&L, but after market conditions changed for the worse, it sought to extract itself from the merger. Although it had looked like easy money, an overlooked provision allowed CapitalSource to back out if the Office of Thrift Services hadn't approved the deal by a certain date. When that date passed, CapitalSource withdrew.

Even Buffett sometimes misses his guess
Some deals seem like a bit more of a sure thing. Even if some big shareholders thought Warren Buffett's Berkshire Hathaway (NYSE:BRK-A) was making a bit of a low-ball bid for Constellation Energy (NYSE:CEG) at $26.50 a share, it seemed hard to imagine he wouldn't capture his prize. When the shares continued to trade for around $23 a stub, it gave some investors the idea that a 15% profit could be made in relatively short order.

In fact, those investors got an even bigger surprise. A rival bid by French utility Electricite de France for just the nuclear power assets of Constellation has boosted shares to more than $27 a share -- above Buffett's offer for the whole company.

There are plenty of arbitrage opportunities in the markets, but knowing which ones are likely to pay off isn't always easy. A perceived arbitrage play between Mueller Water's (NYSE:MWA) class A and class B shares still persists from last year, as does a similar play involving Chipotle Mexican Grill's (NYSE:CMG-B) two share classes. In both cases the B shares have superior rights which ought to make them more valuable, yet still they trade at a discount to the A shares.

Investors would be advised to tread carefully when thinking an arbitrage opportunity exists. Often times the smart money has already examined these plays and exploited whatever opportunities there are to profit from them. If something seems too good to be true, it probably is.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.