6 Potential Takeover Targets

After a fairly long dry spell, important factors are converging to facilitate increased merger and acquisition activity. If played properly, this could be a bonanza for investors. M&A activity, whether negotiated or through a hostile deal, should be helped by the following factors:

Interest rates are very low, and credit availability for good borrowers is easing. Corporate balance sheets are full of cash and, in many cases, are greatly under-levered. Stock valuations for many targets are still attractively low. The current slow-growth economic environment makes it tempting for acquirers to juice their own organic performance with the size and expense synergies of an acquisition. The economy is still early in the current economic expansion. If housing and employment continue to build and an up-cycle ensues, M&A deals taking place now will look extremely successful in hindsight. Low financing rates and undemanding valuations mean that many acquisitions can be easily and quickly accretive to earnings.

Value investors have traditionally had more than their share of takeovers in their portfolios. The reason is simple: They tend to look at a potential investment much the same way a prospective acquirer would. They need to see that a company is attractively and inaccurately priced in the market based on its own sustainable operating fundamentals, strategy and outlook....512 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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