There has been a lot of mergers and acquisitions (M&A) activity in recent months.
This hasn't gone unnoticed by the team at Macquarie Group Ltd (ASX: MQG).
So much so, the broker has run its takeover screen to see if there are any takeover candidates in the current market.
Macquarie points out that after re-running its takeover screen from five years ago, it found that 46% of the 37 stocks it identified had some form of M&A. It feels that this gives its screening process some merit. It explains:
With the offer for AUB plus media reports of PE interest in DMP, we have re-run our takeover screen from 2020. Looking back at the original, there were 37 stocks on the list and 46% had some sort of M&A (9 completed takeovers, 6 failed or pending, and 2 strategic stakes acquired), so the screen has merit. In our view, we are in an environment conducive to deals as the market is near its highs, credit spreads are tight and confidence in the outlook is improving. Our FOMO Meter is back up to +0.98, marking the strength of equity sentiment.
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Which ASX stocks could be takeover targets?
According to the note, Macquarie has identified 16 ASX stocks that it believes could be attractive options for private equity and other suitors.
And from these, there are 11 ASX stocks in particular that standout.
These are pizza chain operator Domino's Pizza Enterprises Ltd (ASX: DMP), pharmaceutical products distributor EBOS Group Ltd (ASX: EBO), Dan Murphy's owner Endeavour Group Ltd (ASX: EDV), language testing company IDP Education Ltd (ASX: IEL), poultry producer Inghams Group Ltd (ASX: ING), intellectual property services provider IPH Ltd (ASX: IPH), packaging company Orora Ltd (ASX: ORA), Smiggle owner Premier Investments Ltd (ASX: PMV), hospital operator Ramsay Health Care Ltd (ASX: RHC), plumping parts company Reliance Worldwide Corporation Ltd (ASX: RWC), and healthcare company Sonic Healthcare Ltd (ASX: SHL).
Other candidates are Australian Clinical Labs Ltd (ASX: ACL), James Hardie Industries plc (ASX: JHX), Reece Ltd (ASX: REH), Spark New Zealand Ltd (ASX: SPK), and Viva Energy Group Ltd (ASX: VEA).
Commenting on the stocks, the broker said:
The result is 16 stocks. Of these, the forward PE is >1 standard deviation below the 10-year average for 11 stocks. Ranked by how far they are below their highs, they are IEL, DMP, IPH, RHC, PMV, EDV, ING, ORA, EBO, SHL and RWC. Two (RHC, ORA) already had failed takeover offers in recent years, while others have been the subject of takeover speculation. Based on the performance of the takeover screen from 2020, we would be surprised if none of the stocks on the list is the subject of takeover interest in the next year.
