Tech companies most likely to get acquired, according to Morgan Stanley


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Reuters/Brendan McDermid

Corporate mergers and acquisitions in the US are rebounding this year.

Thanks to tax cuts, companies have access to more cash they can spend on deals. According to Morgan Stanley, M&A offer intensity, the number of offers relative to the number of stocks, increased to 3.2% in the first quarter from 2.5% in the fourth.

Among S&P 500 sectors, tech saw the second-largest increase.

Morgan Stanley identified 10 tech companies that are the most likely to receive tender offers over the next year. On average, 7% of all the companies published in prior lists received offers in the following 12 months.

“Our model, ALERT (Acquisition Likelihood Estimate Ranking Tool), combines stock characteristics, cohort membership, and data regarding offers to forecast probabilities that stocks receive tender offers in the coming 12 months,” said Brian Hayes, the global head of quantitative research, in a note on Tuesday.

“On the one hand, stock-specific information, such as yield, leverage and valuation, impacts stocks’ offer likelihoods; on the other hand, recent activity levels in the cohorts to which a stock belongs (e.g., sector and size) tend to continue for some time, and this affects subsequent offer intensities for remaining stocks in those cohorts.”

Betting on possible takeover targets has been a successful strategy for investors this year. A Goldman Sachs-curated index of stocks with at least a 15% chance of being acquired in the next 12 months has beaten the benchmark S&P 500 by 4 percentage points since the start of the year.

Here’s Morgan Stanley’s list of the top takeover targets in tech:

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