It happens every year, and 2016 won’t be any different. Larger companies looking to add to 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 candidates that were eventually acquired over the following 12 months. With technology a favorite sector at many of the top firms we cover this year, we thought the RBC list of potential buyout candidates looked intriguing, and found four well-known companies that really caught our eye.
This company does a large amount of business with Cisco, which could have an eye toward it. Celestica Inc. (NYSE: CLS) provides supply chain solutions to customers in the communications, consumer, aerospace and defense, industrial, health care, energy, semiconductor equipment, servers and storage end markets in the Americas, Asia and Europe.
Celestica offers a range of services, including design and development, engineering services, supply chain management, new product introduction, component sourcing, electronics manufacturing, assembly and test, complex mechanical assembly, systems integration, precision machining, order fulfillment, logistics and aftermarket repair and return services.
These products and services are used in various applications, such as servers; networking, wireless and telecommunications equipment; storage systems; optical equipment; aerospace and defense electronics, comprising in-flight entertainment and guidance systems; audiovisual equipment; set-top boxes; printer supplies; and a range of industrial and alternative energy products, including solar panels and inverters.
The stock trades at five times enterprise value (EV) to EBITDA and gross margins of 7%. These are crucial metrics that RBC uses when looking for potential takeover candidates. Celestica also boasts EBIT margins of 3%.
The Thomson/First Call consensus price target for the stock is $10.75. The stock closed most recently at $10.75.