Monday’s burst of merger and acquisition energy is a welcome sign on Wall Street because M&A is often viewed as a leading indicator for optimism and market improvement. Of course, it’s also a way for companies to use some cash sitting idly in market instruments earning ludicrously low interest. But no matter — at least M&A gets people sitting up in their chairs.
Companies get acquired for all sorts of reasons by all sorts of buyers. One typical scenario involves a company that’s been struggling but still offers an acquirer something it can use to increase its own value, if not immediately then perhaps down the line. And such struggling outfits also usually have a beaten-down stock price, making a desirable takeover target easier to swallow financially.
But for any company to be acquired, it has to be desirable in the first place. It has to offer a buyer some value proposition that makes a deal compelling. However, plenty of struggling companies that would do well to get swept up by a white knight will be ignored because a cheap stock price isn’t enough to justify buying them.
Here are three such companies in the news lately that could use the strong arms of a healthy acquirer, but will likely have a hard time finding one: Dell (NASDAQ:DELL), RadioShack (NYSE:RSH) and Groupon (NASDAQ:GRPN). All are caught in the middle of what might be charitably described as difficult situations. A more accurate description would be desperate.
Suffering from losses, bleeding cash and stuck with business models that are either outdated (Dell and RadioShack) or unproven (Groupon), each might need a buyer if it’s to have any future. But really, what do any of these guys have to offer? Breakthrough technology? Bricks-and-mortar real estate? Discount coupons for dinner?
Let’s take a look.