According to a report from PricewaterhouseCooper 's US Transaction Services
division, pent-up demand for mergers and acquisitions is high. Large companies
are looking to find growth opportunities and they certainly have the resources
to pull off transactions, with cash reserves in the neighborhood of $1.5
trillion. At the same time, private equity firms are also flush with capital and
are searching for good values. In fact, if lending starts to loosen up, the deal
activity could be strong. PwC thinks that some of the hot industries for M&A
will be technology, energy and health care. Then again, theyve been popular for
some time. So, what companies might be buyout candidates for 2012? Here's a
look at three: Salesforce.com Salesforce.com 's (NYSE: CRM ) is the dominant
player in cloud computing, which is a fast-growing trend in business
applications. The costs tend to be lower because companies need less investment
for servers and infrastructure. At the same time, customers pay for the software
based on subscriptions. While Salesforce s business still focuses on customer
relationship management (CRM), the company has been building out a broad
platform for application development, collaboration and even social media
analytics. These moves have certainly been helpful in maintaining Saleforces
torrid growth rate. In the latest quarter, revenues increased by 34%. True,
Salesforce has a hefty market cap of $14 billion. But as seen recently, major
legacy software vendors, like Oracle (NASDAQ: ORCL ) and SAP (NYSE: SAP ), have
struck high-priced deals in the sector. In the case of Salesforce, a company
like Microsoft (NASDAQ: MSFT ) or even Google (NASDAQ: GOOG ) could be willing
buyers. Range Resources Over the past few years, the shale energy business has
seen lots of dealmaking. Substantial reserves are available and are often easy
to extract and in areas that have few political risks. And the deals have been
large. In November, BHP (NYSE: BHP ) agreed to shell out $12.1 billion for
Petrohawk Energy. Exxon Mobil (NYSE: XOM ) and Chevron (NYSE: CVX ) have also
struck major acquisitions. One shale operator that could be an attractive buyout
target is Range Resources (NYSE: RRC ), which focuses on the Marcellus region in
the eastern U.S. Some of the advantages of this area includes the low-cost of
production and easy access to lucrative markets. Range Resources currently has
long-term leases on 800,000 acres in the area (it also has properties in the
Permian Basin and Mid-Continent). These assets would definitely be attractive
for the giant oil operators, which need to find ways to bolster their reserves.
And with natural gas prices falling, it could be a good time to buy while
valuations are cheaper. Quest Diagnostics Quest Diagnostics (NYSE: DGX ) is a
top provider of diagnostic testing equipment, mostly in the U.S. It has a system
of over 2,000 centers, which represent a substantial barrier to entry. Yet the
company has had difficulties with its growth rate. Keep in mind that because of
the slow economy people have been putting off medical care, although this could
be a short-term trend. After all, the aging baby boomers will inevitably use
more and more medical services. Interestingly enough, some signs show that Quest
is already preparing for some type of buyout. It has announced cost-cutting
efforts and has boosted its dividend. Also, the CEO has departed. All in all,
Quest would be a smart acquisition for a private equity group. Consider that the
cash flows should remain fairly stable for the long-haul, which is likely to
make it easy to finance a transaction. Tom Taulli runs the InvestorPlace blog
" IPOPlaybook ," a site dedicated to the hottest news and rumors about
initial public offerings. He is also the author of "All About Short Selling"
and "All About Commodities." Follow him on Twitter at @ttaulli . As of this
writing, he did not own a position in any of the aforementioned stocks.
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