3 stocks to profit from increased mergers and acquisitions

Owning shares in the target company is not the only way to profit from "takeover mania".

| More on:

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

It is apt timing by Motley Fool contributor Mike King to cover some of the potential takeovers on the ASX, because there can be no doubt that corporate activity is heating up. For example, just this week SAI Global Limited (ASX: SAI) announced a takeover proposal.

The Australian yesterday announced we had entered "takeover mania." Just weeks ago David Jones Limited (ASX: DJS) announced a serious proposal, having earlier rebuffed the suggestion of a merger with Myer Holdings Ltd (ASX: MYR).

Takeovers, mergers or even just proposals are sure to benefit Macquarie Group Ltd (ASX: MQG). In September last year Motley Fool contributor Peter Andersen wrote that "there are now definite signs that merger and acquisitions activity in particular is picking up. Should this occur, it will be a bonus." If you want evidence of this, Macquarie Capital is advising the SAI Global takeover proposal. As an aside, Macquarie Group shares are up 30% since Peter first suggested they were a buy in July 2013.

Share registrar Computershare Limited (ASX: CPU) is one of the obvious beneficiaries of corporate activity. As the dominant share registry, it stands to gain from the increasing number of IPOs. I've lost count by now, but the end of 2013 saw several overhyped IPOs, such as Ozforex Limited (ASX: OFX) and Freelancer Limited (ASX: FLR). The (short term) success of those IPOs is likely to encourage more.

On top of that Computershare provides advice and handles the necessary paperwork for mergers and acquisitions. There's no doubt the company will benefit in a major way from increasing corporate activity. However, the company yields 2.8%, trades on a P/E ratio of almost 20 and at almost 20 times cashflow. It is therefore fair to say that while it offers growth, shares are not cheap.

Those looking for a bargain might be more attracted to Advanced Share Registry Limited (ASX: ASW). It too offers share registry services, and stands to benefit from corporate activity in the same ways Computershare does. Although the company yields more than double Computershare at an impressive 6%, it does not seem to be benefitting from the uptick in takeovers, mergers and IPOs. That's because the company is based in Perth and much of its business has historically been in the mining sector, which is currently cooling down.

Motley Fool contributor Claude Walker (@claudedwalker) owns shares in Azure Healthcare.

More on ⏸️ Investing

Close up of baby looking puzzled
Retail Shares

What has happened to the Baby Bunting (ASX:BBN) share price this year?

It's been a volatile year so far for the Aussie nursery retailer. We take a closer look

Read more »

woman holds sign saying 'we need change' at climate change protest
ETFs

3 ASX ETFs that invest in companies fighting climate change

If you want to shift some of your investments into more ethical companies, exchange-traded funds can offer a good option

Read more »

a jewellery store attendant stands at a cabinet displaying opulent necklaces and earrings featuring diamonds and precious stones.
⏸️ Investing

The Michael Hill (ASX: MHJ) share price poised for growth

Investors will be keeping an eye on the Michael Hill International Limited (ASX: MHJ) share price today. The keen interest…

Read more »

ASX shares buy unstoppable asx share price represented by man in superman cape pointing skyward
⏸️ Investing

The Atomos (ASX:AMS) share price is up 15% in a week

The Atomos (ASX: AMS) share price has surged 15% this week. Let's look at what's ahead as the company build…

Read more »

Two people in suits arm wrestle on a black and white chess board.
Retail Shares

How does the Temple & Webster (ASX:TPW) share price stack up against Nick Scali (ASX:NCK)?

How does the Temple & Webster (ASX: TPW) share price stack up against rival furniture retailer Nick Scali Limited (ASX:…

Read more »

A medical researcher works on a bichip, indicating share price movement in ASX tech companies
Healthcare Shares

The Aroa (ASX:ARX) share price has surged 60% since its IPO

The Aroa (ASX:ARX) share price has surged 60% since the Polynovo (ASX: PNV) competitor listed on the ASX in July.…

Read more »

asx investor daydreaming about US shares
⏸️ How to Invest

How to buy US shares from Australia right now

If you have been wondering how to buy US shares from Australia to gain exposure from the highly topical market,…

Read more »

⏸️ Investing

Why Fox (NASDAQ:FOX) might hurt News Corp (ASX:NWS) shareholders

News Corporation (ASX: NWS) might be facing some existential threats from its American cousins over the riots on 6 January

Read more »