Even the biggest tech companies must acquire outside resources to remain competitive. Microsoft’s decision to buy LinkedIn is an example of this need to evolve, which we call “innogration.” It describes the combination of a company’s innovation with integrating other businesses to catapult it ahead of competitors. But deals made between two large companies are rare; far more common are big companies buying little ones, usually to minimal media fanfare, as the acquired company is often so small that few investors are affected.

Shareholders of those tiny companies, though, can reap huge rewards quickly when a big company like Western Digital or Microsoft comes knocking on the door. To that end, I will show you how to spot small-cap tech stocks that are likely candidates for a larger company to acquire as part of its innogration strategy. For the purposes of this exercise, our search was restricted to information technology companies with a market capitalization (total dollar value of all outstanding common stock) of less than $3 billion that trade on a U.S. exchange. The search yielded two great takeover candidates, and if you can’t wait to hear what they are, you’ll find them at the end of this article. If the method for tracking down these great finds interests you, keep reading.

Winnowing Down the Numbers

No company wants to buy another company’s problems, so businesses burdened with too much debt or on the verge of bankruptcy can be excluded straight away. For these companies, an asset sale or strategic alliance is the more likely transaction, which is much less lucrative to their shareholders than a buyout.

I screen out these balance-sheet busters using two filters. The first is called a current ratio,  or current assets divided by current liabilities. I look for companies with at least twice the amount of liquid assets to short-term debts, or numbers greater than 2.0. The second filter is a debt-to-equity ratio, or total debt divided by total equity. Here, the number should be less than .50. That indicates the company’s assets are worth at least twice as much as its liabilities.

These two simple filters eliminate most small-cap tech stocks, and of those remaining, the majority are grossly overvalued, diminishing their appeal to a potential buyer. To zero in on reasonably valued stocks, I apply two more filters: a forward price-to-earnings ratio (current share price divided into estimated earnings one to two years out) of less than 20 and a price-to-sales ratio (the current share price divided by annual sales revenue per share) of less than 2.0.

Position of Strength

Because I only want companies with a history of gross revenue growing at a healthy clip, I restrict the pool of candidates to those with  annual sales growth of at least 20% for the past five years. These companies have solid businesses letting them negotiate from a position of strength and not feel compelled to jump on any buyout offer.

After applying this second set of filters, only five companies of the original 1,184 make my short list of near-term buyout candidates: Applied Optoelectronics, Cirrus Logic, Super Micro Com, Synaptics Inc. and Virtusa Corp. At this point our filters have taken us as far as they can go, and it’s time to look at each company closely to determine which might appeal most to a potential buyer.

One of them—Virtusa—we eliminate immediately, as it’s the only company on the list that doesn’t make anything. Instead, it provides IT consulting services to an array of industries. In its most recent fiscal year, Virtusa grew revenue 25%, had a gross profit margin of 35%, and added 65 new clients, an increase of 57%.

While those are impressive accomplishments that could make Virtusa a takeover target for other reasons, such as achieving economies of scale, a services company is an unlikely acquisition candidate for a company intent on innogration.

That leaves us with four possibilities.

Applied Optoelectronics (NSDQ: AAOI) makes fiber-optic networking products primarily for businesses that transmit a large volume of information, such as data centers (cloud storage and transmission) and cable television companies. Its data center customers include Amazon.com, Alibaba.com, Baidu and Microsoft; major cable customers are Cisco, Arris and Teleste.

Almost all of the growth in Applied Optoelectronics annual revenue the past four years was in the data center segment, which is up nearly 1,000% since 2012. With the cable television business on the wane, Applied Optoelectronics is effectively a cloud company and may want to join forces with a major player.

Cirrus Logic (NSDQ: CRUS) makes integrated circuits for mobile computing devices. The company owns more than 2,000 patents for software used primarily in audio and voice applications. Its list of big-name customers includes SiriusXM, Samsung, Motorola, LG, Lenovo, Ford, Harman and Vizio, but not Apple, even though Cirrus provides the digital-analog converter that sends music through an earphone from an iPhone.

Although Cirrus serves more than 3,000 global customers, its top two customers accounted for 79% of total revenue in the first quarter this year. An unfounded rumor that Apple might eliminate the headphone jack from the iPhone 7, and thereby negate Apple’s need for Cirrus’s digital-analog software, briefly pushed the share price down nearly 30% early this year. That should have scared senior management enough so that the company would be receptive to a takeover offer.

Super Micro Computer (NSDQ: SMCI) provides high-performance servers for large data centers. That segment generates the most income, 26% of total sales, and grew 40% year-over-year during the first quarter. The company is reaping the benefits of a recently constructed factory in Taiwan for Super Micro’s fast-growing Asian market.

The company has a quasi-symbiotic relationship with Intel, which uses the same architecture that Super Micro does for most of its servers. Whenever Intel upgrades its hardware, Super Micro immediately follows up with a corresponding improvement to its servers. At some point Intel may want to acquire Super Micro for its engineering expertise.

Synaptics Inc. (NSDQ: SYNA) develops touch-pad technology for fingerprint recognition and other applications using mobile devices. Recent security breaches in businesses and governments renewed interest in biometric-enabled account access, technology that Synaptics provides through its Natural ID Family of fingerprint authentication options.

The company projects a 300% compound annual growth rate in demand for its Touch and Display Driver Integration over the next four years as Synaptics’ share of the smartphone market grows from less than 5% to greater than 50% by 2019. The company recently transferred its research division to China, targeting it as a major growth market. Biometric technology is the next wave in Internet security, and a big online merchant like Alibaba may think Synaptics an ideal partner.

A Pair of Aces

Of these four, two jump out as being in the right place at the right time: Applied Optoelectronics and Synaptics. Each has a large portfolio of intellectual property rights for software in two of the fastest-growing technology markets, cloud storage and Internet security. The other two companies, Cirrus Logic and Super Micro Computer, produce hardware that could be commoditized, making these companies less desirable takeover targets for innogration than either Applied Optoelectronics or Synaptics.

Because they’re equally attractive, I suggest buying both companies to increase the likelihood of getting one right. And if neither is acquired, they should both perform well on their own.

Buy Applied Optoelectronics up to $12 and Synaptics Inc. up to $75.