| For example, Elon Musk made his early fortunes when he founded and then sold Zip2 and X.com (which then merged with the company that launched Paypal). He used the money from selling his early companies to found Tesla (NSDQ: TSLA), which is now worth billions of dollars more than his earlier companies. A Yummy Premium When one corporation takes over another, the buyer's stock usually falls while the seller's stock rises. This is because the acquiring company typically pays a nice premium to sweeten the deal. According to a Boston Consulting Group analysis of more than 12,000 M&A deals that occurred globally between 1999 and 2019, the average premium paid was 30%. In the last six years or so, the premium has been generally below that average (in the 20's), but if you are an investor in the company being bought out, a quick 20%+ increase in your stock's value overnight is not too shabby. This is why whenever there is a rumor that a company may be bought out, that company's stock will jump. Still, you'll want to invest in a quality company that has other things going for it other than being a potential takeover target. You don't want to invest in a company in bad shape just hoping for a buyout. A company desperate to sell probably won't get a great premium anyway. And if a buyout never happens, you are stuck with a lousy stock. A Few Helpful Signs It's impossible to accurately predict who will be taken over and who won't, but there are many signs to look for. I will mention a few here. If a company has a popular niche product or service, it could become a takeover target. Even if the smaller company hasn't been able to convert the popularity into consistent profits yet, a larger company, which has access to much more resources, could see ways to add value to the niche product/service and to its own existing operations through integration. A company with a strong balance sheet and no complicated capital structure or overhanging legal or accounting issues is especially attractive. After all, the buyer wants the transaction to go smoothly. Nobody wants to buy something that will cause headaches, no matter how cheap it is. A good sign is if the small company already partners with one or more larger companies in certain project(s) and joint ventures. Working together lets the big company get a good look at the other company's characteristics and helps the execs know each other. If the big company likes what it sees, it could decide to just take over. But maybe the M&A scene is too risky for you. During the coronavirus crisis, you should also consider safe havens, such as stable dividend paying stocks. Dividend-payers are time-proven vehicles for long-term wealth building, but they're also safe harbors in turbulent seas because companies with robust and rising dividends by definition boast the strongest fundamentals. We've put together a list of reliable cash cows with the proven ability to weather market booms and busts. Download our free "dividend map" of high yielders. | 
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