One great way for companies to expand growth, earnings and product offerings beyond internal organic expansion is to go the takeover route. While sometimes it can prove to be dilutive, especially if the majority of the deal is done in stock, it can also prove to be accretive by adding earnings immediately. A large and comprehensive recent report from RBC spotlighted hundreds of stocks in multiple sectors that are small caps, defined as $4 billion in market cap and under, that could have a very real chance of being takeover candidates.
We screened the RBC list of takeover candidates for the higher profile and more well-known stocks. These may prove to be solid companies to own, even if they ultimately are not bought or merged. With that in mind, buying any of these companies is suited to accounts with a very high risk tolerance.
CACI International Inc. (NYSE: CACI) makes the RBC list, and it announced last week that it was awarded a $38 million contract to provide test, evaluation and information assurance services to the Naval Surface Warfare Center, Dahlgren Division in Dahlgren, Va. CACI provides information solutions and services in support of national security missions and government transformation for intelligence, defense and federal civilian customers. With a huge emphasis put on national security and defense, any of the major contractors in the field like General Dynamics or Lockheed Martin may have an interest in acquiring the company.
The Thomson/First Call consensus target for the stock is $91.32. Shares closed last Friday at $87.29.
CSG Systems International Inc. (NASDAQ: CSGS) is a market-leading business support solutions and services company serving the majority of the top 100 global communications service providers, including leaders in fixed, mobile and next-generation networks such as AT&T, Comcast, Dish Network, Orange, Reliance, SingTel Optus, Telecom New Zealand, Telefonica, Time Warner Cable, T-Mobile, Verizon, Vivo and Vodafone. The company offers a broad portfolio of licensed and software-as-a-service (SaaS)–based products and solutions that help its clients compete more effectively and improve business operations. Any of the major SaaS leaders could be interested, or even a mega-tech giant like Cisco Systems.
CSG investors are paid a solid 2.3% dividend. The consensus price target is $34.33. Shares ended trading last Friday at $29.91.
Riverbed Technology Inc. (NASDAQ: RVBD) is the leader in application performance infrastructure, delivering the most complete platform for location-independent computing. Location-independent computing turns location and distance into a competitive advantage by allowing IT to have the flexibility to host applications and data in the most optimal locations while ensuring applications perform as expected, data is always available when needed and performance issues are detected and fixed before end users notice. A large tech like Akamai may have an interest in adding this type of technology and software.
The consensus price target is $20.20, and the stock closed trading on Friday at $20.94.
Synchronoss Technologies Inc. (NASDAQ: SNCR) provides software-based activation and personal cloud solutions for connected devices. The company is considered one of the mobile innovation leaders that provide cloud solutions and software-based activation for connected devices across the globe. The company’s proven and scalable technology solutions allow customers to connect, synchronize and activate connected devices and services that empower enterprises and consumers. VMware may have an interest in a stock like this.
The consensus price target is set at $55.89. The stock closed on Friday at $44.26.
Unisys Corp. (NYSE: UIS) is a more familiar name to many investors and is a global information technology company working with many of the world’s largest companies and government organizations to secure and keep their mission-critical operations running at peak performance, as well as streamlining and transforming their data centers. Unisys offers clients outsourcing and managed services, systems integration and consulting services, high-end server technology, cybersecurity and cloud management software, and maintenance and support services. Again VMware, or even a software giant like Microsoft, could be attracted to this old-school tech company.
The consensus price objective for the company is $31. Shares closed Friday at $22.64.
Clearly all these companies offer services and technologies in silos that are hot right now. Large-scale data and security is super important to both business and governments, and all these stocks look like attractive take-out candidates.