Mergers and Acquisitions activity is hot again, which has led to speculation over which companies will be acquired next. Since the technology sector has been strong for years and is seen as the future driver of the economy, it has the most potential for deal making. Goldman Sachs Group recently released a list of eight tech companies it believes could be acquired next:

  1. Acacia Communications, Inc. (ACIA)
  2. Lumentum Holdings Inc. (LITE)
  3. Cornerstone OnDemand Inc. (CSOD)
  4. Criteo SA (CRTO)
  5. Pandora Media Inc (P)
  6. Zynga Inc (ZNGA)
  7. MACOM Technology Solutions Holdings Inc. (MTSI)
  8. Sunedison Semiconductor (SEMI)

You might want to consider Goldman Sachs’ opinion as it had LinkedIn Corp.’s (LNKD) odds of being acquired at 15%-30%. The odds of acquisition for the companies listed above are all between 30% and 50%, which is extraordinarily high. Despite that being the case, there is still no company with more than a 50% chance of being acquired. (For more, see: Microsoft to Buy LinkedIn for $26.2 Billion.)

Key Metrics

Below you will find the key metrics for all eight companies on the list. We'll look at revenue, net income, profitability over the past four quarters, debt-to-equity ratio and operating cash flow. For revenue, if a company has delivered consistent revenue growth over the past three fiscal years, it will be indicated with an Y and if not it will be indicated with an N. The same rule applies for net income.

For profitability over the past four quarters, or P4Q, the chart indicates how many quarters have been profitable for the company. For debt-to-equity ratio anything below 2 is respectable and below 1 is strong. Above 2 is cause for concern. (For more, see: The Big Winners of the Microsoft-LinkedIn Deal.)

Acquisition Targets

Acacia Communications

Business: Provides high-speed coherent interconnect products in the Americas, Europe, the Middle East, Africa and the Asia Pacific region.

Revenue: N/A

Net Income: N/A

P4Q: N/A

D/E Ratio: 0.03

Operating Cash Flow: $36.78 million

Lumentum Holdings

Business: Manufactures and sells optical and photonic products for optical networking and commercial laser customers worldwide.

Revenue: Y

Net Income: N (two fiscal years)

P4Q: 1 (of three quarters)

D/E Ratio: 0.00

Operating Cash Flow: $86.60 million

Cornerstone OnDemand

Business: Provides talent management solutions delivered as software as a service.

Revenue: Y

Net Income: N

P4Q: 0

D/E Ratio: 31.78

Operating Cash Flow: $31.59 million

Criteo

Business: Engages in digital performance marketing in France and internationally.

Revenue: Y

Net Income: Y

P4Q: 2 (of two quarters)

D/E Ratio: 0.02

Operating Cash Flow: $115.05 million

Pandora

Business: Provides Internet music streaming services in North America.

Revenue: Y

Net Income: N

P4Q: 0

D/E Ratio: 0.36

Operating Cash Flow: -$82.17 million

Zynga

Business: Markets and operates social games as live services played on the internet, social networking sites and mobile platforms in the United States, North America, Asia and the European Union.

Revenue: N

Net Income: N

P4Q: 1

D/E Ratio: 0

Operating Cash Flow: -$750 thousand

MACOM

Business: Designs, develops, manufactures and markets analog RF, microwave, millimeter wave and photonic semiconductor products in the United States, China, Taiwan, Japan and internationally.

Revenue: Y

Net Income: N

P4Q: 2

D/E Ratio: 0.84

Operating Cash Flow: $67.34 million

Sunedison Semiconductor

Business: Develops, manufactures and sells silicon wafers in the United States and internationally.

Revenue: N

Net Income: N

P4Q: 0

D/E Ratio: 0.47

Operating Cash Flow: $54.70 million

The Bottom Line

Out of the eight stocks listed above, Criteo appears to be the most fundamentally sound. This doesn’t mean it will outperform its peers, but the strong numbers would help justify a position in the stock beyond acquisition potential. (For more, see: Could Pandora Be the Next Takeover Target?)

Dan Moskowitz does not have any positions in any of the stocks listed above. 

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