This report from Cass Business School and Intralinks looks at the reason why some companies are more likely to become acquisition targets. The findings are based on a global sample of 33 952 public and private companies over the period 1992-2014.
There are six statistically significant predictors that measures how likely it is for a company to become an acquisition target:
- Growth: Target companies have higher growth than non-targets
- Profitability: Private target companies are more profitable than private non-targets, whereas public target companies are less profitable than public non-targets
- Leverage: Private target companies are significantly more leveraged than private non-targets. Public companies with much lower leverage than the average are also most likely to become acquisition targets
- Size: Private target companies are significantly larger than private non-targets, whereas public targets are significantly smaller than public non-targets
- Liquidity: Target companies have lower levels of liquidity than non-targets
- Valuation: Public target companies have lower valuation multiples than public non-targets