PRINCIPAL CHARACTERISTICS OF A POTENTIAL TAKEOVER CANDIDATE
Poor market performance of stock C which may well encourage stockholders to tender.
Low P/E multiple C particularly in event of an exchange offer.
Strong liquid-assets position.
Assets that can be spun off to provide funds for takeover; under-valued assets.
Book value in excess of market.
Replacement value of physical assets that is far higher than is reflected in price of stock.
Substantial cash flow from depreciation.
Unused debt capacity; nominal debt.
Dividends that can actually pay interest on securities offered in an exchange offer or compensate raider for interest he may be paying on borrowed money.
Concentrated share ownership (which could be either a possible strength or a potential weakness, as in our scenario).
Large quantities of stock in Street name or held by institutions.
Declining or stagnant dividends that have led to shareholder dissatisfaction.
Small amount of stock owned (or controlled) by management.
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