Cheap shares often make great takeover targets. That’s because undervalued companies, particularly those with strong underlying assets, established market positions, or untapped potential, can offer significant opportunities for buyers.
These companies also present opportunities for retail investors, as shareholders can benefit from the rapid appreciation of share prices when takeover offers are made. Just look at Hargreaves Lansdown stock, which jumped 51% last year after the board agreed to a takeover in August.
So, here are two companies that I think could be takeover targets in 2025.
This gene-editing leader looks cheap
CRISPR Therapeutics (NASDAQ:CRSP) could be an attractive takeover target due to its low valuation and strong balance sheet. It’s also a world leader in gene therapies, with an approved gene-editing treatment, Casgevy, which could generate up to $3.9bn in annual revenue. In addition to Casgevy — the world’s first approved gene therapy — the company has a strong pipeline of treatments in development, including those targeting cancers and diabetes.
The above certainly suggests that CRISPR Therapeutics is undervalued, with a market cap only around $3.3bn. This relatively low valuation makes it an appealing acquisition target for larger healthcare companies looking to enter the gene-editing market. Moreover, with $1.9bn in cash and $200m in debt, this stock’s enterprise value is just $1.6bn.
What’s more, some analysts suggest there is a ready-made buyer in CRISPR’s partner on Casgevy, Vertex Pharmaceuticals. Now Vertex is a massive company with a market cap of $106bn and more than $6bn in cash. With Vertex responsible for 60% of Casgevy costs and set to take 60% of earnings, it may be something of a no-brainer to consolidate control over the programme — and the pipeline — through a takeover.
CRISPR is a stock I own, and while I’m tempted to buy more, my holding already represents significant exposure to the gene editing sector.
Discounted stock, full-price fashion
Most investors will be familiar with Burberry’s (LSE:BRBY) challenges over the past 12 months. The stock slumped on falling sales and challenges in China, where the economy appears to be missing its target.
With the share price significantly down from its highs — albeit up from recent lows — the stock is still being touted as a takeover target. In fact, in November 2024, there were rumours that the Italian skiwear company Moncler was interested in acquiring the British luxury brand Burberry.
In addition to its brand strength and unique positioning in British luxury, a takeover sounds feasible given the consolidation that already exists within the industry. Fashion houses like LVMH and Kering have acquired a host of luxury brands over the years, delivering economies of scale and synergies between things like skincare brands and high-end Belmond hotels.
Having rode Burberry shares to the peak, sold, and then bought again at a much lower price only to see them fall further (I sold again), I’m staying away from this iconic brand. However, I’m sure some investors will see an opportunity.
This post was originally published on Motley Fool
