What next for these top FTSE 250 takeover targets?

These mid-caps have both become targets for opportunistic buyers. But will the deals actually happen?

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

It’s been a rollercoaster day for holders of second-hand vehicle seller BCA Marketplace (LSE: BCA) so far. Despite releasing a more-than-decent set of full-year results, shares fell well over 3% in early trading only to recover strongly.

With takeover talk still fresh in the minds of holders, where next for the mid-cap’s share price?

Record performance

Thanks to a combination of strong organic growth and the full-year impact of acquisitions, revenue rose just under 20% from £2.03bn to £2.43m in the 12 months to the end of April — more than the £2.3bn analysts were expecting.

BCA achieved “increased volumes across all divisions” over the reporting period, including a 6.5% rise in the UK where the company shifted more than one million vehicles. International Vehicle Remarketing sales rose 4.3% to 362,000 and WeBuyAnyCar delivered its sixth consecutive year of double-digit volume with 219,000 sales (up 12.9%). All this helped the company achieve a 17.6% rise (to £159.5m) in adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) and reduce net debt by 26.4% to £191.6m.

Having already rejected a £1.6bn bid (equivalent to 200p per share), today’s record results have clearly come at the right time for BCA and will help to justify the company seeking an improved offer from private equity firm Apax. Whether this materialises before the 8 July deadline, however, is questionable. 

The fact that BCA has managed to turn things around following concerns over falling demand for new and used vehicles in the UK (causing the shares to sink to as low as 150p back in March) could mean that Apax no longer sees value in the deal. Should this be the case, a spate of profit-taking might kick in as traders see limited upside. Given BCA’s already punchy valuation before today, there’s some logic in that. 

It’s a hard one to call. Since it would be against the Foolish philosophy of buying great companies and holding for years rather than days, I certainly wouldn’t recommend picking up the stock as a short-term punt.

Another bid target

Of course, BCA isn’t the only company attracting attention right now. That said, the situation at serviced office provider IWG (LSE: IWG) feels more complicated. 

Yesterday’s update on trading wasn’t well received by the market with shares falling almost 3% as the company announced that operating profit would be between £15m-£20m lower than that previously forecast.  

In addition to stating that its UK business wasn’t performing as well as expected, IWG revealed that plans to grow its network to satisfy increasing demand would now cost in the region of £30m more than the £200m originally forecast thanks to management’s desire to increase the number of locations from 230 to 275.

With four prospective buyers (Terra Firma, TDR Capital, Starwood Capital and Prime Opportunities) eyeing up the company, the timing of this news wasn’t great. While having multiple suitors will give some reassurance to those already holding stock in the £3bn cap, the fall in profit guidance might lead it to be sold for less than previously hoped.

Clearly, a lot depends on just how patient a buyer is willing to be in order to reap the “good returns” IWG’s management think are possible following the planned investment. With world markets looking increasingly jittery over recent weeks, however, a deal may not look as appealing as it once did. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Paul Summers has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Young Asian man drinking coffee at home and looking at his phone
Investing Articles

Is Rolls-Royce’s share price an irresistible bargain?

Is Rolls-Royce's share price the FTSE 100's greatest bargain today? Royston Wild explains why he would -- and wouldn't --…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Is the Vodafone share price a wonderful bargain or a horrible value trap?

As the Vodafone share price continues to fall, is it now a stock to buy with a view to a…

Read more »

Hand of a mature man opening a safety deposit box.
Investing Articles

I’d buy 95,239 shares of this banking stock to generate £200 of monthly passive income

Muhammad Cheema takes a look at how Lloyds shares, with a dividend yield of 5.9%, can generate a healthy monthly…

Read more »

Person holding magnifying glass over important document, reading the small print
Investing Articles

Can FY results give the Antofagasta share price a long-term boost?

The Antofagasta share price has had a good five years. Now the company says it's set to enter a new…

Read more »

Person holding magnifying glass over important document, reading the small print
Dividend Shares

Can I make sustainable passive income from share buybacks?

Jon Smith notes the rise in share buybacks from FTSE 100 companies, but flags up why they aren't great for…

Read more »

Front view of a mixed-race couple walking past a shop window and looking in.
Investing Articles

After the Currys share price rockets, here are more potential UK takeover targets!

The Currys share price has surged 39% higher in response to news of a takeover bid. Which UK stocks could…

Read more »

Investing Articles

Down 25%, where will the British American Tobacco share price go next?

The British American Tobacco share price has taken a hit. But this Fool isn't deterred. He think's now could be…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

2 cheap dividend stocks I’d snap up in a heartbeat!

This Fool is on the look out for quality dividend stocks and earmarks these two firms as great options to…

Read more »