<article>A new report describing six qualities predicting a corporate takeover has been released by <a style="color: #000080;" href="http://dealstreetasia.com/tag/intralinks" target="_blank">Intralinks</a>, a global provider of Virtual Data Room software and services for managing M&amp;A transactions,</article>

A new report describing six qualities predicting a corporate takeover has been released by <a style="color: #000080;" href="http://dealstreetasia.com/tag/intralinks" target="_blank">Intralinks</a>, a global provider of Virtual Data Room software and services for managing M&amp;A transactions,
In a new report titled “<a style="color: #000080;" href="https://www.intralinks.com/resources/publications/attractive-targets-part-1?utm_source=wire&amp;utm_medium=media&amp;utm_campaign=216419+global-cass+report-attractive+targets" target="_blank">Attractive M&amp;A Targets: Part 1 – what do buyers look for?</a>,” a report based on a new study into what makes a company an attractive acquisition target conducted in association with the M&amp;A Research Centre at Cass Business School, City University London, the research examines six key financial measures of almost 34,000 public and private companies, each with annual revenues of at least $50 million, over 23 years.
The research findings provide predictive insights into which companies are likely to become acquisition targets, highlighting significant differences between private and public company targets.
The sample in this study comprised a global dataset of public and private companies, with minimum annual revenues of US$50 million, during the period 1992-2014. The sample includes 24,507 unique public companies and 9,445 unique private companies, a total of 33,952 unique companies, which translates into 275,713 firm-year periods.
The research found that six measures are statistically significant predictors of a company becoming an acquisition target., with significant differences in the values of these measures impacting the probability of acquisition. The findings indicated that growth, profitability, leverage, size, liquidity and valuation were significant predictors of takeover.
According to the Intralinks report, target companies generally had 2.4 per cent higher growth than non-targets, with the growth “premium” of targets even higher during market downturns, recessions and periods of economic uncertainty.
Meanwhile, in terms of profitability, private target companies are more profitable than private non-targets, whereas public target companies are less profitable than public non-targets. Since the year 2000, profitability of private targets is 1.2 per cent higher than that of private non-targets, whereas profitability of public targets is 1.7 per cent less than public non-targets. Since 2008, public targets are 3.3 per cent less profitable than public non-targets.
Also Read: <a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/singapores-ma-momentum-stumbles-2-51060/">Singapore’s M&amp;A momentum drops in 2016: KPMG</a>
<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/sg-dealbook-40-53569/">Singapore: New Silkroutes in M&amp;A; Jasper launches JV; Secura enters JV</a>
<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/vinamilk-seeks-to-buy-second-u-s-dairy-company-in-growth-push-53035/">Vinamilk on an M&amp;A drive, seeks to buy second US dairy firm in growth push</a>
When considering leverage and size, it was found that private target companies are significantly more leveraged than private non-targets, while public targets have lower levels of leverage than public non-targets. Private target companies had over three times more leverage than private non-targets, with the post-2008 seeing public targets having 11 per cent less leverage than public non-targets.
In terms of size, private target companies are also significantly larger than private non-targets, whereas public targets are significantly smaller than public non-targets. On average, private targets were 63 per cent larger than private non-targets while public targets were 55 per cent smaller than public non-targets.
Finally, in terms of liquidity and valuation, target companies tended to have lower levels of liquidity than non-targets, with companies in the bottom two deciles for liquidity being on average 35 per cent more likely to become acquisition targets in any given year than companies overall.
Valuations also saw public target companies possessing lower valuation multiples than public non-targets. Public companies in the bottom three deciles for valuation were on average 30 per cent more likely to become acquisition targets in any given year than public companies overall.
Commenting on these findings, <a style="color: #000080;" href="https://uk.linkedin.com/in/philipwhitchelo" target="_blank">Philip Whitchelo</a>, VP (Strategy and Product Marketing) at Intralinks stated: “We found that high leverage and large size are the two most statistically significant predictors of a private company becoming an acquisition target, whereas small size and low profitability are the two most statistically significant predictors of a public company becoming an acquisition target.”
&#8220;Since 2008, acquirers have been particularly targeting underperforming public firms, because underperforming public companies are more likely candidates for operational improvements and cost savings through merger synergies. Buyers also take advantage of public companies whose valuations have fallen the most during market downturns,” he added.
Companies in the energy sector are among those with the highest likelihood of being acquired, with private energy firms having almost twice the probability of being an acquisition target in any given year than private companies overall, and public energy companies had the second highest likelihood of becoming acquisition targets after companies in the finance sector.
Commenting on the results, <a style="color: #000080;" href="https://www.ft.com/content/b8f535a2-1e51-11e0-bab6-00144feab49a" target="_blank">Professor Scott Moeller</a>, Director, M&amp;A Research Centre at Cass Business School in London said: “There have been many historic deals which reflect our results. Take the acquisition of Panasonic Healthcare Co Ltd by KKR in 2013, or the acquisition of Whyte &amp; Mackay by Emperador in 2014 or the acquisition of Biomet by Zimmer in 2014 – these targets had high probabilities of being acquisition targets based on their leverage and size – and this eventually became a reality.”
Also Read:
<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/50502-50502/">Online platforms have democratised M&amp;A: Philip Whitchelo, Intralinks</a>
<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/ma-q4-2016-flat-asia-pacific-intralinks-52002/">M&amp;A in Q4 2016 to be flat in Asia Pacific: Intralinks</a>
<a style="color: #ff0000;" href="http://www.dealstreetasia.com/stories/apac-ma-shows-9-7-growth-q12016-compared-2015intralinks-39649/">Asia-Pacific M&amp;A shows 9.7% growth in Q1 2016 compared to 2015: Intralinks</a>

A joint report by Intralinks and Cass Business School says six factors predict M&A, with energy firms most likely to be bought out. 

Energy firms most likely to be acquired: Intralinks

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief

Energy firms most likely to be acquired: Intralinks

Start your deal-making journey now!

Bring stories like this into your inbox every day.

Sign up for our newsletter - The Daily Brief