Using its own stock screening software Quest and a leveraged buyout (LBO) free cash flow yield valuation metric, Canaccord honed in on 13 stocks that appear ripe for the taking.
The wealth manager looked for companies with a market cap above £200m, and an LBO free cash flow yield higher than 10%.
It also ensured that net debt, capital operating expenses and pension deficit divided by EBITDAR was less than 2x.
Heavily indebted companies and those with above-average volatility in their operating returns were excluded from the search.
With a market cap of £8.5bn, Schroders is the highest valued company of the 13 stocks by some distance.
And it has the third-highest LBO free cash flow yield at 15.3%
Schroders had already been identified by Canaccord deputy CIO Richard Champion as a potential takeover target weeks earlier, given “sluggish inflows” and doubts over the diversity of its product range.
But the numbers provide a further convincing argument, said senior equity analyst Simon McGarry.
Financial services companies and FTSE 250 members, TP ICAP and IG Group Holdings, were also singled out as likely targets by Canaccord.
The list likewise included five professional services companies like human resource firm Hays, two construction outfits, including Galliford Try, IT company, Computacenter.
Transport company Go Ahead and environmental consultancy RPS Group also made the cut.
Echoing the majority of analysts in the industry right now, McGarry expects to see a spike in M&A activity involving UK corporates.
