Tips To Finding M&A Deals: Boston Beer Co Inc (SAM), Parker Drilling Company (PKD), Compania Cervecerias Unidas S.A. (ADR) (CCU)

2) Relatively Low Valuations: You should also for fairly valued companies. Some companies like Compania Cervecerias Unidas S.A. (ADR) (NYSE:CCU) will never be cheap, but another cash-rich and smart synergy exploiter company like AB INBEV PARTS S. (ETR:ITK) could acquire it even at seemingly fair multiples. CCU trades at 2013 x18 P/E and x11 EV/EBITDA. You can compare that with Boston Beer Co Inc (NYSE:SAM)’s 2013 x32 P/E and 15x EV/EBITDA which, operating in the same industry, seems expensive even for a US-based beer company. Meanwhile, Parker Drilling Company (NYSE:PKD) seems inexpensive trading at 2013 x4.5 EV/EBITDA.

3) Manageable market cap size: Companies trading between $500 million and $2 billion are, statistically, the most probable targets. There are many Private Equity funds that can manage deals that size and most blue chip companies tend to buy niche small competitors that usually sell for that size. Boston Beer Co Inc (NYSE:SAM) and Parker Drilling Company (NYSE:PKD) fall within that sweet spot, selling for $2 billion and $575 million, respectively. With a market capitalization of $5 billion, CCU is a big company but small next to AB InBev’s $15.5 billion EBITDA.

Deal activity has picked up year to date (deal value is up by 14% Year over Year), but, despite cash rich corporate balance sheets, it’s still 36% and 64% below the 10 year average in the US and Europe, respectively. If the US keeps its growth up and the Eurozone finds a way to get through its structural problems I am sure we shall have many deals coming down the line. Use my tips to find targets. I have found them useful (and profitable) in the past.

The article Tips To Finding M&A Deals originally appeared on Fool.com and is written by Federico Zaldua.

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