In 2024, there was plenty of takeover activity within the FTSE 100. Companies that received offers included DS Smith, Rightmove, Darktrace, and Anglo American.
This year, I expect to see plenty more due to the fact that valuations remain low. With that in mind, here are three potential takeover targets.
Smith & Nephew
First up, we have Smith & Nephew (LSE: SN.). It’s a medical technology company that specialises in orthopaedic solutions. This name often comes up in discussions about potential takeovers. And I wouldn’t be surprised to see some interest from another business in 2025.
Currently, the company’s trading on a forward-looking price-to-earnings (P/E) ratio of just 11.6. That low valuation could be attractive to a larger player in the market such as Johnson & Johnson or Stryker or perhaps a company that’s looking to get exposure to this fast-growing area of healthcare.
It’s worth noting that Smith & Nephew’s being held back by issues in China at the moment. This could be off-putting for potential buyers as it’s a risk.
All things considered however, I definitely think there’s a chance it could receive an offer.
Whitbread
Another company that looks cheap and could be of interest to a larger rival is Whitbread (LSE: WTB). It owns the Premier Inn brand.
Currently, the stock’ well off its highs and the P/E ratio using the earnings forecast for the year ending 28 February is only 14.4. That’s a lot lower than the valuations on some other hotel companies (IHG’s on 28), and it could be attractive to a larger player looking for exposure to the budget hotel market.
One downside to this company is that most of its revenue comes from the UK. The fact that it’s not highly diversified geographically could put off some buyers.
At the same time, the UK focus may be appealing to a foreign player. After all, the UK’s a popular tourist destination and Premier Inn’s a well-known brand.
Sage
Finally, I wouldn’t be surprised to see a bid come in for Sage (LSE: SGE), a software company that specialises in accounting and HR solutions.
This stock’s a bit different to the other two in that it’s not beaten up at present. Currently, it’s trading close to its all-time highs.
Yet its market-cap’s still only £12.9bn, which is peanuts in the technology world (rival Intuit has a market-cap of £140bn). So it wouldn’t shock me if a larger tech company was interested in buying it.
In the years ahead, the market for accounting software’s projected to grow by around 9% a year as businesses undergo digital transformation. And Sage is an industry leader.
It’s worth noting that competition‘s rising in this area of technology. So t could be other companies that see takeover activity and not Sage.
This company has an excellent long-term track record however. So I reckon it could be of interest to many businesses.
Worth buying?
I’ll point out that it’s generally not smart to buy a stock just because it could be a takeover target. Often, bids don’t materialise.
But in this case I think all three stocks I’ve highlighted are worth considering today. All have attractive long-term prospects and have been good investments historically.
