How To Profit From Trading Company Takeovers

30 May How To Profit From Trading Company Takeovers

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Thanks to the recent exposure that I received from the Globe & Mail, Canada’s nation wide newspaper, I was given the opportunity to share how I made money by speculating on public companies which might get taken over by larger companies. This type of trading strategy could be extremely lucrative as companies typically pay a huge price premium over their current stock price to be acquired by other companies. If you’re looking to profit from these types of merger and acquisition strategies, here is a list of potential company takeover target criteria that I use to evaluate a possible opportunity:

– Look for small to mid size companies

–  Large cash reserves so the acquirer may be able to use the cash to pay down the large amount of debt to finance the deal

– Lots of insider ownership (incentives for founders/management to sell)

– Influential company CEO’s in same sectors who sit on their board or advisers

– Attractive valuation (market prices company below book value due to poor management)

– Intellectual Property (company owns IP/patents that an acquirer requires)

– Develops leading edge technologies (development phase)

– Niche oriented companies (dominant their specific area)

– Hot investment sector due to high demand for their product/service (increasing commodity prices)

For those who haven’t read the Globe & Mail article, here’s the link:

http://www.theglobeandmail.com/globe-investor/investment-ideas/how-investors-can-scour-for-potential-takeover-targets/article2434862

PS. I sold my RIMM position already at a loss.

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