Takeover activity has stepped up a gear and these four companies could be snapped up.
After the relatively lean pickings in 2009, this year is expected to be a bumper one for mergers and acquisitions.
A survey in mid-December, by UBS investment bank and Boston Consulting Group (BCG), found that there is a large appetite among European CEOs for takeovers in the year ahead. Responses from 166 senior executives from 22 industries suggested that nearly one in five companies hopes to announce a significant deal (annual sales €500m+).
Given the efforts that Kraft is making to gobble up Cadbury (LSE: CBRY), it seems that this appetite for acquisition is just as great in the US.
Below I've outlined four possible takeover plays. Of course, you shouldn't buy purely because you think a bid is on the way -- the company must have decent prospects regardless. I'd also recommend you do your own research to see if you think these are likely to happen. And remember the old adage 'buy on the rumour, sell on the fact' may apply. So, if a bid is announced, that may be a good time to make a graceful exit, rather than waiting for the whole process to be completed.
The first two candidates for a possible takeover are AIM stocks...
Intelligent Environments
Intelligent Environments (LSE: IEN) provides software that allows the customers of banks and retailers to manage their accounts online.
It has fallen back in the past couple of months since it announced, back in December, that an order for its NetFinance platform was cancelled. This was following the merger of the Chelsea Building Society and the Yorkshire Building Society.
However, its revenue and profits should be in line with the previous year. Moreover, given its positive cash flows and future growth prospects, I think may make it an attractive takeover candidate for a systems integrator who specialises in the financial sector/retail sectors. One name that springs to mind is Fiserv, which supplied Tesco (LSE: TSCO) with its banking platform.
Ceres Power
Ceres Power Holdings (LSE: CWR) is a leading alternative energy company based in the UK. It develops fuel cell technology for use in small scale combined heat and power products for the residential sector.
It signed a strategic agreement with British Gas a while back and last year received £2m in milestone payments. It is now raising £28m via a placing to fund the launch of its mains gas CHP product in the second half of 2011. Centrica (LSE: CNA), which owns British Gas, already has a 9.95% holding and is a prime candidate to take over the company, once further field trials have been conducted.
Anyway, moving onto the main market...
French Connection
Call it a hunch but I'm sure that someone is going to try to snap up French Connection (LSE: FCCN) this year. From anecdotal evidence, I doubt whether it had a bumper Christmas and wouldn't be surprised if a rival, or perhaps a big name in retail with private finance behind it, tries to acquire it.
Its assets are worth considerably more than the share price at the moment. Net current asset value as at 31 July 2009 was £60.6m, equating to 63p a share. Moreover, it could be a useful strategic acquisition for someone who believes they can revitalise its iconic high street brand.
Of course, they'll have to convince Stephen Marks, its Chairman and Chief Executive, who holds 41.8% of the shares.
Meggitt
In the aerospace sector, Meggitt (LSE: MGGT) has been identified by several analysts as a potential target, most likely by BAE Systems (LSE: BA).
Meggitt, with a market cap of around £2bn, designs and supplies systems and components for the global aerospace, defence and electronics industries. Its products include unmanned air vehicles, aircraft fire detection systems and automobile climate control systems. Consensus estimates are that it will deliver pre-tax profits of around £220m for 2009, and it has a dividend yield of over 3%.
Credit Suisse commented back in September that, given the ongoing consolidation in the sector, it was a prime target due to its dominance in its market niches.
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Chris owns shares in Intelligent Environments.
