{"id":32041,"date":"2012-09-03T08:31:45","date_gmt":"2012-09-03T12:31:45","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/2012\/09\/the-art-of-predicting-takeover-targets\/"},"modified":"2012-09-03T08:32:23","modified_gmt":"2012-09-03T12:32:23","slug":"the-art-of-predicting-takeover-targets","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2012\/09\/03\/the-art-of-predicting-takeover-targets\/","title":{"rendered":"The Art of Predicting Takeover Targets"},"content":{"rendered":"

Article by Investment U<\/a> <\/p>\n

I think we\u2019ve all heard about the Best Buy <\/strong>(NYSE: BBY) <\/strong>takeover attempt by now.<\/p>\n

The story goes that Founder Richard Schulze offered to buy the company somewhere in the range of $24 to $26 per share. When the announcement was made a few weeks ago, Best Buy <\/strong>shares shot up around 13%. That\u2019s because if the proposed deal was to go through, a Best Buy shareholder stood to earn a premium of around 47% from the previous week\u2019s close.<\/p>\n

That\u2019s a nice little return in such a short period of time.<\/p>\n

And it got me wondering\u2026 \u201cWouldn\u2019t it be nice to get in on an acquisitioned stock before the takeover bid was ever announced?\u201d<\/p>\n

Obviously, you could gamble and possibly get stuck with a dog of a company. That\u2019s risky business.<\/p>\n

Just because a company seems to be the right price for a takeover doesn\u2019t mean you should automatically dabble. There are a lot of companies out there that are cheap for a reason – it\u2019s because they have problems that no one wants to take on. So the important question is: Which companies are worth the risk?<\/p>\n

So, how do you go about this?<\/p>\n

Is there a market crystal ball or some special formula known only to market insiders? Not necessarily\u2026<\/p>\n

But what I did find is that Morningstar will make the decision for you, and then show you how they came up with their decision.<\/p>\n

Morningstar\u2019s Merger and Acquisition Insights Report for 2012<\/strong><\/h2>\n

In 2011, Morningstar began to release their predictions on takeover targets. Potential targets were placed in categories like size, leverage, cash flow and by other industry specific quantitative and qualitative factors. More importantly, they went through their list and refined it to highlight the companies that appear undervalued so that everyday investors could get in on the action.<\/p>\n

The merger and acquisition insights report for 2012, titled Economic Headwinds Shift Catalysts for Takeover Activity<\/em>, is an in-depth look at investment ideas among a possible list of potential takeover candidates. It also gives merger and acquisition analysis by sector, credit implications of M&A activity and presents investing prospects for options investors.<\/p>\n

According to Morningstar, this is how they came up with their list of potential targets:<\/p>\n