M&A Activity: Down but Still Alive
Merger and acquisition (M&A) activity has slowed, with lingering uncertainty weighing on potential deals.
However, M&A activity hasn’t stopped entirely, with news of Cisco Systems CSCO stepping up and announcing an acquisition of Splunk SPLK in recent days.
And there have been other notable deals as well in 2023, including Bunge’s BG merger with Viterra and The J.M. Smucker Co.’s SJM acquisition of Hostess Brands. For those who have missed the madness of M&A activity, let’s take a closer look at each.
Cisco Acquires Splunk
Cisco, an American-based multinational digital communications technology corporation, announced its acquisition of Splunk just yesterday. Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by harnessing the value of their data.
Cisco has agreed to buy the company for $157 per share in cash, reflecting roughly $28 billion in equity value. Together, the two companies will become one of the world’s largest software companies, expected to accelerate Cisco’s goals of increasing its recurring revenue.
Cisco has been on a hot earnings streak as of late, exceeding consensus earnings and revenue expectations in five consecutive quarters. As we can see below, the company has seen a recent acceleration in revenue growth.
In its latest print, Q4 revenue of $15.2 billion improved 16% from the same period last year.
Image Source: Zacks Investment Research
Bunge Merges with Viterra
In June, it was revealed that Bunge entered into a merger agreement with Viterra to create an innovative global agribusiness company. Together, the companies offer farmers greater market access and value-added solutions, expected to increase efficiency and capabilities across value chains.
Greg Heckman, CEO of Bunge, said, “The combination of Bunge and Viterra significantly accelerates Bunge’s strategy, building on our fundamental purpose to connect farmers to consumers to deliver essential food, feed and fuel to the world.”
Like CSCO, the company has been posting strong quarterly results as of late, exceeding the Zacks Consensus EPS Estimate by an average of 20% across its last four releases. In its latest print, the company posted a 42% EPS beat but reported revenue below expectations.
The market had a strong reaction to the release, as we can see illustrated below.
Image Source: Zacks Investment Research
J.M. Smucker Acquires Hostess Brands
J.M. Smucker, a titan in convenience and snack foods, recently unveiled a $4.6 billion acquisition of Hostess Brands, forking up $34.25 per share. The acquisition nicely expands SJM’s product offering, also accelerating its focus on convenient consumer foods.
The deal includes Hostess’ baked goods brands, including but not limited to Donettes, Twinkies, Zingers, CoffeeCakes, and more.
Mark Smucker, CEO of SJM, said, "We are excited to announce the acquisition of Hostess Brands, which represents a compelling expansion of our family of brands and a unique opportunity to accelerate our focus on delighting consumers with convenient solutions across different meal and snacking occasions.”
SJM shares could interest those with an income-focused approach, currently yielding a solid 3.3% annually. Dividend growth is also there, with the payout growing a modest 5% annually over the last five years.
Image Source: Zacks Investment Research
Bottom Line
Mergers and acquisitions can offer several notable benefits for companies and shareholders, including cost savings from economies of scale, increased market share, and other synergies that the combined business can create.
And while M&A activity has slowed, it’s still alive, with news of Cisco Systems CSCO stepping up and announcing an acquisition of Splunk SPLK recently. In addition to this deal, we’ve also seen Bunge’s BG merger with Viterra and The J.M. Smucker Co.’s SJM acquisition of Hostess Brands in 2023.
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Cisco Systems, Inc. (CSCO) : Free Stock Analysis Report
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