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Looking for potential LBO candidates, I ran a screen on the Russell 1000.

First, I limited the screen to only include companies with a net cash position, which suggests the business could bear significantly more leverage, and a potential buyer could use balance sheet cash to pay part of the acquisition price.

I then sorted the remaining companies by EV / forward EBITDA to look for companies that could be acquired on the cheap.

The following table shows the results. (Note: All data per Bloomberg.)

Company EV / Forward EBITDA EV / TTM EBITDA Net Cash / Market cap
HUMANA INC 1.133 0.927 7.76%
HEALTH NET INC 2.515 3.598 4.18%
WESTERN DIGITAL 3.372 3.190 33.34%
CAREER EDUCATION 3.394 3.602 27.94%
MICRON TECH 3.497 3.148 4.37%
CHEVRON CORP 3.645 5.092 0.48%
SEAGATE TECHNOLO 3.660 3.158 3.55%
FOREST LABS INC 3.706 6.254 25.40%
CEPHALON INC 3.887 4.413 7.94%
LEAR CORP 3.971 5.970 16.41%
MOTOROLA SOLUTION 3.994 4.220 33.82%
DELL INC 3.995 5.058 34.64%
APOLLO GROUP-A 4.115 3.369 13.28%
AOL INC 4.170 2.110 32.29%
FREEPORT-MCMORAN 4.337 5.586 0.03%
GAP INC/THE 4.390 4.152 10.96%
INTEL CORP 4.431 4.996 6.55%
BEST BUY CO INC 4.499 4.564 0.96%
IAC/INTERACTIVE 4.614 9.763 24.01%
ITT EDUCATIONAL 4.638 3.057 5.53%

Several of the results look worthy of further research.

Western Digital (NASDAQ:WDC) and Seagate (NASDAQ:STX)

Merger rumors have swirled around both of these data storage companies. Given their low multiples and strong balance sheets, both companies could make tempting targets for private equity firms, and rumors have even swirled that the two may try to acquire each other.

Dell (NASDAQ:DELL)

The PC manufacturer has fallen behind both the tablet and mobile phone race and is trying to re-brand itself as an enterprise solutions provider. Given its strong insider ownership and high cash balance, insiders have not ruled out taking the company private, as the CFO recently confirmed in an interview.

AOL (NYSE:AOL)

The former internet giant hasn't been able to gain any traction in its stock price since the spin-off from Time Warner (NYSE:TWC) and has considered all forms of value enhancement, from a breakup to a merger with Yahoo (NASDAQ:YHOO).

Best Buy (NYSE:BBY)

Best Buy, like its competitor RadioShack (NYSE:RSH), trades at an amazingly low multiple given its strong ROIC, share buybacks, dividends, and potential growth. Their strong balance sheet + relatively stable cash flow would make the company a tempting target for a mega buyout, and a merger with a competitor could also make sense.

Intel (NASDAQ:INTC)

Intel's stock has been beaten up over fears of its future in a tablet/smart phone world and questions about its McAfee merger. While the company is likely to big for an LBO in today's market, given the company's strong cash flows and ROIC, it could make sense for the company to leverage up its balance sheet to repurchase shares.

Freeport-McMoRan (NYSE:FCX) and Chevron (NYSE:CVX)

Again, I don't think either of these companies will be bought out. They're likely too big to be acquired in today's market, and most private equity companies try to avoid cyclical and commodity plays. However, I mention them because they're leveraged in a huge way to the booming commodity markets and the market seems to be discounting their improving earnings power.

With their strong balance sheets, they can weather volatility in commodity prices and possibly buy up competitors on the cheap if prices crater and enjoy improving earnings on the upside.

Source: 20 Potential LBO Candidates