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Eight Surprising M&A Candidates

1. Ambac Financial Group (ABK)

Tax asset: $2.7 billion

Tax free earnings potential: $7.7 billion

Estimated profitability: N/A (lost $690 million in first quarter)

Comment: Analysts barely follow mortgage bond insurers Ambac and MBIA (MBI) any more. The insurers have lost billions, as they face huge claims on securities they insured and are unable to write any new insurance due to their weak capital position and a huge drop in issuance of the type of bonds they previously insured.

"It's anyone's guess as to whether they'll make it or not. It's just kind of a black box right now," says Morningstar analyst Jim Ryan.

Still, MBIA and Ambac did not get bailed out, meaning they are not the political lightning rod that Citigroup or AIG are. The fact that no one pays any attention to them anymore means they might be able to pull off this unusual tax strategy in relative obscurity.

-- Written by Dan Freed in New York.

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