It happens every year, and 2016 won’t be any different. Larger companies looking to add growth in addition to that of the organic or internal variety scan the field for purchases and acquisitions that are easy to bolt on and could add returns in a timely fashion. This year the process may even speed up some as the market sell-off that happened through the first two months may have already put some companies in the sights of acquirers despite the recent market rally.
In what is a yearly and very all-encompassing report, the analysts at RBC again go through every sector looking for possible takeover candidates. Last year the company’s takeover screens yielded 29 takeouts that were eventually acquired over the following 12 months. The most popular area was software and services, which yielded a total of five deals. So we start this year’s coverage with four companies from that sector on the RBC watchlist that look promising.
Many of our readers may very well use the free software the company provides for computer security. AVG Technologies N.V. (NYSE: AVG) is an online security company providing leading software and services to secure devices, data and people. AVG’s award-winning technology is delivered to users worldwide.
AVG’s Consumer portfolio includes Internet security, performance optimization, location-based and phone control services and personal privacy and identity protection for mobile devices and desktops. The AVG Business portfolio — delivered by managed service providers, value-added-resellers and other resellers — offers IT administration, control and reporting, integrated security and mobile device management that simplify and protect businesses.
The stock trades at 7.4 times enterprise value (EV) to EBITDA and with gross margins of 85%. These are crucial metrics that the RBC team uses when looking for potential takeover candidates. AVG also boasts EBIT margins of 17%.
The Thomson/First Call consensus price target for the stock is $27.03. The stock closed trading on Monday at $19.84 per share.
This is a lesser known company that may draw the eye of a bigger suitor. Fleetmatics Group PLC (NASDAQ: FLTX) is a leading global provider of mobile workforce solutions for service-based businesses of all sizes delivered as software-as-a-service (SaaS). Its solutions enable businesses to meet the challenges associated with managing local fleets and improve the productivity of their mobile workforces by extracting actionable business intelligence from real-time and historical vehicle and driver behavioral data.
The company’s intuitive, cost-effective Web-based solutions provide fleet operators with visibility into vehicle location, fuel usage, speed and mileage and other insights into their mobile workforce, enabling them to reduce operating and capital costs, as well as increase revenue. An integrated, full-featured mobile workforce management product provides additional efficiencies related to job management by empowering the field worker and speeding the job completion process — quote through payment. As of December 31, 2015, Fleetmatics served approximately 35,000 customers, with approximately 709,000 subscribed vehicles worldwide.
The company trades at 14.3 time EV to EBITDA and sports a 69% gross margin figure along with a 14% EBIT margin.
The consensus price target for Fleetmatics is posted at $55. The stock closed Monday at $39.19 per share.
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