The recent flood of merger and acquisition activity in the markets has led investors to wonder what larger companies look for when they seek an acquisition target. Alan Lancz, president of Alan B. Lancz & Associates, shared his three critical variables.
1. Companies with proprietary tech or an entry point to a strong segment of a growing market are ideal candidates.
“The most important thing is proprietary technology or access to a lucrative growing market,” Lancz told CNBC.
“You saw that with the fight for 3Par between Hewlett-Packard and Dell ."
2. Companies with "huge and consistent" cash flow make more M&A screens, particularly if there is a significant amount of cash on the balance sheet.
3. Companies at historically low valuations due to a temporary miscue that can be corrected.
Lancz noted that global M&A activity in August 2010 was at the highest level ($267.2 billion) than in any August since 1999 ($274.9 billion).
Scorecard—What He Said:
- Lancz's Previous Appearance on CNBC (Aug. 16, 2010)
More M&A Opinion:
- Expect Bank M&A 'Explosion' After November: Bove
- Who's Next? 3 Possible Tech M&A Targets
- Cramer: Playing the Market’s Merger Mania
CNBC Data Pages:
CNBC's Companies in the News:
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No immediate information was available for Boockvar or Hardesty.