I have written on takeovers for this Report for many years. Some stocks screaming takeover never got a bid, yet rewarded long-term investors because they were quality companies. Some taken over leapt after the bid, after years of losses.
Caveats aside, identifying takeover targets is useful because it forces you to think about company quality, management, sustainable competitive advantage and why the business would be worth more to another company. And, mostly, valuation.
Larger companies, direct rivals and private-equity firms do broadly similar analysis in identifying targets. They, too, want to find undervalued companies worth more if bolted onto a larger business, split up, recapitalised, improved or with new management.