Potential Takeover Targets on AIM and How To Spot Them

And so we carry on from yesterday...

When it comes to the AIM market you certainly won’t see M&A activity occurring as frequently as you do in the FTSE 100.

But it does happen... it's tracking them down that’s the tricky part.

And getting it right isn't a simple walk in the park. But with Lady Luck on your side (i.e. me), let's see if we can spot a few opportunities to watch out for that could potentially make you a lot of money.

Now it'd be impossible to reveal the ins and outs of the best way to track takeover targets in a brief email, but I'll do my best.

However, there will be a way for you to get the whole picture very soon. In the New Year I'll be compiling a special report that outlines how you can use M&A's to bolster your portfolio.

So keep your eyes peeled for that. But for now...

It's all about spotting potential takeover targets

Smaller companies are always going to be takeover targets for the bigger fish in the pond. So it really helps to identify these companies right from the start, and that’s what I intend to do.

Increased M&A activity is boosting small caps as they are temptingly cheap. So, if we buy them now we may reap a nice reward next year if these companies get snapped up.

M&A activity in small caps is picking up the pace, which gives you more scope to benefit from the deals happening everyday in the City.

If you look at the figures from a decade ago you'd have spotted 40 - 50 takeovers happening per year.

Nowadays the levels of consolidation are radically higher. In fact for three years in a row we’ve seen at least 300 company buy-outs!

So what do potential bidding companies look for?

Good companies with free cash flow and low levels of debt – basically a solid business.

But remember as I said yesterday... M&A activity can be a complicated business.

Take the recent situation with Aurum mining...

According to Arbuthnot Securities they received a takeover approach from Celtic Resources today.

Arbuthnot stated that "the tie-up would be commercially positive for both companies, and the takeover would allow development of the Andash mine in Kyrgyz republic".

Welcome to the fickle world of M&A...

Meanwhile, Eureka Mining have received an all-share offer from Celtic Resources, offering 5 Celtic shares for every 16 Eureka shares held, which would value each Eureka share at 53.4p.

Eureka shares will cease to trade on 20 December this year.

The group will now operate two gold mines and one molybdenum mine in the same region of Kazakhstan, which will allow substantial cost savings.

So what is going on here?

It's hard to tell at the moment. The prices aren’t giving too much away!

Celtic Resources were up 2.07% at Friday's close, Eureka Mining were down 1.01% and Aurum Mining was down 1.03% too.

As you can see, these prices certainly aren’t following the usual pattern of a proposed takeover - you'll find out about all these 'takeover patterns' in my special New Year report.

There isn’t a great deal of upside in Eureka’s price on the offer from Celtic anyway, so wouldn’t expect great shakes there.

And of course, the proposed acquisition of Aurum is just a rumour at the moment.

I'll be keeping a close eye on this situation in the meanwhile, but there's been no news from any of the companies to suggest what might be going on.

What I can say is that it looks very interesting.

Bye for now,

Melissa Carroll

for The Penny Sleuth