So, how does one find a company that is going to be scooped up? Usually by the time a company announces that they have hired an investment advisor, the stock has already moved a gazillion points as the news leaks. So, you cant wait that long. If you have to put your hat in the ring, you are going to have to be a detective.

What are the most attractive reasons that a company would want to acquire someone? Most of the time its growth in a sector that is compatible with the existing companies business model. There has to be some form of synergy.

I think that the way to find take over candidates is to look at growth possibilities in niche markets that could enhance a larger company.

When a major player like CSCO, VZ, AT&T or whom ever is looking to get into an area, they have two choices. Develop it themselves and market it or acquire it. CSCO has acquired most of their growth over the past several years. So, mergers, partnerships and acquisitions is the way to grow. In general terms, finding a fast growing company in a sector that is regarded as up and coming is the first step. Then, see if that company has been approached at all in the past. Read the press releases, and look at the existing partnerships. Is there a big partner already working with them that would make a nice fit?

There is no guarantee when you are trying to find takeover candidates, but if you want to play that game, and you do a lot of homework, you might get lucky now and then. I read that even the big takeover specialists like Mario Gabelli only get it right about 30% of the time, but when you hit one and it opens 10 dollars over where you got it, it is indeed very powerful stuff.