5 Possible Takeover Targets for 2021

What to Do When Your Stock is a Takeover Target

As the U.S. economy recovers, look for M&A activity to pick up. You could profit from owning these potential takeover targets.

Last year started off with a bang for the mergers & acquisitions business. According to nxtsoft.com, the first quarter of 2020 saw its best quarter since 2015, with 69 deals closing in the U.S., four more than in 2019. And then came COVID-19. By May, global deals had declined by 28%, year-over-year.

However, as you may have expected, the number of distressed deals due to company restructurings and bankruptcies rose—from 7% to 30% by the end of April, according to Nasdaq.com.

But the business perked up in May, and by the end of November, Bloomberg says that global deals added up to $2.6 trillion, a 16% decline from 2019.

Some of the largest deals in 2020, according to dealroom.net, were:

  1. $30 billion acquisition of Willis Towers Watson by AON
  2. $21 billion acquisition of Maxim Integrated by Analog Devices
  3. $21 billion acquisition of Speedway gas stations by Seven and I
  4. $18.5 billion acquisition of Livongo by Teladoc
  5. $13 billion acquisition of E*Trade by Morgan Stanley
  6. $7.3 billion acquisition of GrubHub by Just Eat
  7. $6 billion acquisition of Credit Karma by Intuit

As for sectors, M&A activity centered mostly around the technology, media, entertainment, telecom, and energy industries.

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So, What’s ahead for 2021?

The coronavirus is still raging; vaccinations are happening (albeit at a slower pace than expected); and remote work and video conferencing look like they are here to stay. Add in a possible big stimulus jolt to the economy, and I think each of those trends will drive the M&A market in 2021.

In addition, lower interest rates and the rise of SPACs—special-purpose acquisition corporations that raise money through an initial public offering (IPO) in order to buy companies—have raised more than $64 billion; that compares very favorably to the $13 billion they raised in 2019, according to Spacinsider.

According to PwC, 2021 deals should amount to $250 billion to $275 billion, with several estimated to reach more than $50 billion. But with so many new companies popping up as a result of COVID, leaving a fragmented market, you can count on some of their larger peers to gobble them up this year.

Consequently, I think we’ll see lots of deals in the biotech and technology arenas. And because energy companies are still very underpriced, you can bet on some combinations there, also. Lastly, marijuana legalization continues to spread, bringing opportunities to consolidate that sector.

With the November election, marijuana is now in some way legal in 35 states. There are now nine multi-state operators with market caps above $1 billion—and that’s not counting the companies that plan to go public this quarter. In July, Curaleaf completed its merger with Grassroots, expanding its presence to 23 states.

In the last quarter, there was a flurry of deal announcements in technology, energy, and biotech.

Technology Deals:

  • Salesforce (CRM) to acquire Slack (WORK) for $27.7 Billion
  • Adobe (ADBE) and Workfront, $1.5 billion
  • Atlassian (TEAM) and Mindville, amount undisclosed
  • Cisco (CSCO) to buy Slido, amount undisclosed
  • Facebook (FB) to acquire Kustomer, $1 billion

Energy Deals:

  • Chevron Corporation (CVX) buying Noble Energy (NBL) for $5 billion
  • Pioneer Natural Resources Company (PXD) purchasing $4.5 billion Parsley Energy, Inc. (PE)
  • Cenovus Energy Inc. (CVE) and Husky Energy Inc. (HSE) announcing a $2.89 billion merger
  • Devon Energy Corporation (DVN) and WPX Energy, Inc. (WPX), in a $6 billion merger
  • ConocoPhillips (COP) buying Concho Resources Inc. (CXO) for $9.7 billion

Biotech Deals:

  • AstraZeneca (AZN) announced the biggest deal of the year, offering to buy biotech major, Alexion Pharmaceuticals (ALXN), for almost $39 billion.
  • Gilead (GILD) purchasing Immunomedics (IMMU), $21 billion
  • Roche (ROG) spent $450 million on the acquisition of Inflazome
  • Santen Pharmaceutical (SNPHY) bought Eyevance for $225 million
  • Eli Lilly (LLY) will pay $1 billion for Prevail Therapeutics (PRVL)

Those announcements excited investors and potential buyers and the following names have come up as possible targets.

Possible Takeover Targets

  • Asana (ASAN)
  • Box (BOX)
  • DocuSign (DOCU)
  • Dropbox (DBX)
  • Smartsheet (SMAR)
  • BioMarin Pharmaceutical Inc. (BMRN)
  • uniQure N.V. (QURE)
  • Deciphera Pharmaceuticals, Inc. (DCPH)
  • Continental Resources (CLR)
  • EOG Resources (EOG)
  • Cimarex Energy (XEC)

Of course, I don’t know if any of these deals will happen, but if you already own the stocks, keep your eyes peeled. And if you don’t own them, right now, these five takeover targets look like the most interesting of the bunch:

  1. Dropbox (DBX)
  2. Smartsheet (SMAR)
  3. Continental Resources (CLR)
  4. EOG Resources (EOG)
  5. Cimarex Energy (XEC)

Of course, just because they are possible takeover targets doesn’t make them sure winners. But I offer them as ideas for you to review and determine if they fit into your investment strategy and goals.

Lastly, if you’d like to keep on top of the M&A business, these websites seem to be some of the best, according to Dealroom.net:

  • Reuters.com
  • SeekingAlpha.com
  • Pitchbook.com
  • CNBC
  • NYTimes.com
  • MiddleMarket.com
  • Genengnews.com
  • FT.com
  • Bizjournals.com
  • TheMandAJournal.com

Happy Investing and Happy New Year!

Nancy Zambell

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