Barron's reports that UBS analysts have produced a list of 27 potential LBO targets. Excerpt:
Leveraged buyouts have increased as private-equity firms scour the stock market for targets in which to invest tens of billions of dollars committed by pension funds and other institutional clients.
Notable deals announced this year include Clayton Dubilier & Rice's $3 billion purchase of Emergency Medical Services (ticker: EMS) and Providence Equity Partners' $1.9 billion acquisition ofSRA International (SRX). Private-equity buyers failed to snare other targets, including Sara Lee (SLE) and Dynegy (DYN), owing to objections by the companies or shareholders. U.S. LBO activity totaled $41.5 billion in the first quarter, 23% above the $33.6 billion in 2010's first three months, reports Dealogic.
What companies could be the next targets? Randy Udell and Ben Canet of the UBS U.S. special-situations equities sales team, recently listed 27 potential targets. Two prior lists, published in March and July 2010, had a good hit ratio of LBOs and other takeovers, such as King Pharmaceuticals, bought by Pfizer in March.
The new list includes a sizable number of retailers, including Aeropostale (ARO),Limited Brands (LTD), RadioShack (RSH) and Ross Stores (ROST). The sector is a private-equity favorite, partly because retailers tend not to buy other retailers, leaving the field open for financial purchasers.