What is a Target Company?

A target company is an entity that has been selected as a takeover candidate by an acquirer. The selection is usually made based on certain minimum criteria that the acquirer has established. For example, a target company must have revenue that exceeds a certain threshold level, it has a reasonable revenue and profit growth rate, its products complement those of the acquirer, and it sells into a geographic region not already addressed by the acquirer.

The term can also be used to indicate a business that is being targeted for a lawsuit.

Example of a Target Company

Eskimo Construction builds cold-weather facilities, and wants to expand the geographical range of the firm’s offerings. Accordingly, it devises acquisition criteria as companies that engage in wet weather construction, with revenues of no greater than $10 million and consistent profitability of at least 5%. Based on these criteria, it selects Deluge Construction as a target company.