Do you follow potential takeover targets? When a company announces that it is being taken over, its stock price usually jumps to reflect the takeover premium being offered for the company. This is why analysts and others follow potential takeover targets.
We compiled a list of rumored potential takeover/leveraged buyout (LBO) targets from various sources including Minyanville and Seeking Alpha. We then screened these names for those with high liquidity - since cash held by the target company directly offsets the cost of an acquisition, high cash makes a company more attractive as a takeover target.
We screened for those with current ratios above 3, indicating high liquidity. Since the current ratio is current assets/current liabilities, a ratio of 3 or more indicates the company has liquid assets at least three times their short-term liabilities.
We also screened these potential takeover targets for those with strong sales trends, comparing changes in revenue to changes in accounts receivable over the last year.
Receivables represent the portion of revenue not yet collected, so the smaller the portion of revenue the better. We screened for companies seeing faster growth in revenue than accounts receivable year-over-year, as well as receivables comprising a smaller portion of current assets over that time period.
Interactive Chart: Press Play to compare changes in market cap over the last two years for the stocks mentioned below. Analyst ratings sourced from Zacks Investment Research.
Do you think these companies are attractive takeover targets? Use this list as a starting point for your own analysis.
List sorted by difference between growth in revenue and accounts receivable.
1. Biogen Idec Inc. (BIIB): Develops, manufactures and markets therapeutics in the areas of neurology, immunology, hemophilia and oncology in the United States and internationally. Market cap at $30.03B. Price at $127.95. Current ratio at 3.26. Takeover/LBO rumor sourced from Minyanville. Revenue grew by 8.83% during the most recent quarter ($1,326.71M vs. $1,219.07M y/y). Accounts receivable grew by -1.04% during the same time period ($831.23M vs. $839.99M y/y). Receivables, as a percentage of current assets, decreased from 33.07% to 27.94% during the most recent quarter (comparing three months ending 2011-12-31 to three months ending 2010-12-31).
2. Cerner Corporation (CERN): Designs, develops, markets, installs, hosts and supports healthcare information technology, healthcare devices and content solutions for healthcare organizations and consumers worldwide. Market cap at $12.46B. Price at $74.23. Current ratio at 3.42. Takeover/LBO rumor sourced from Seeking Alpha. Revenue grew by 23.08% during the most recent quarter ($615.63M vs. $500.2M y/y). Accounts receivable grew by 18.1% during the same time period ($563.21M vs. $476.9M y/y). Receivables, as a percentage of current assets, decreased from 41.61% to 37.49% during the most recent quarter (comparing 13 weeks ending 2011-12-31 to 13 weeks ending 2011-01-01).
3. Adobe Systems Inc. (ADBE): Operates as a diversified software company in the Americas, Europe, the Middle East, Africa and Asia. Market cap at $16.30B. Price at $33.84. Current ratio at 3.14. Takeover/LBO rumor sourced from Seeking Alpha. Revenue grew by 1.7% during the most recent quarter ($1,045.22M vs. $1,027.71M y/y). Accounts receivable grew by -3.96% during the same time period ($512.21M vs. $533.35M y/y). Receivables, as a percentage of current assets, decreased from 15.92% to 14.61% during the most recent quarter (comparing 13 weeks ending 2012-03-02 to 13 weeks ending 2011-03-04).
*Accounting data sourced from Google Finance, all other data sourced from Finviz.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.