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M&A Activity: Down but Still Alive

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The pace of mergers and acquisitions (M&A) has decreased due to ongoing uncertainty impacting potential deals.

However, despite the slowdown, M&A activity has not come to a complete halt. Cisco Systems recently made headlines by announcing its acquisition of Splunk.

There have been other noteworthy deals in 2023 as well. Bunge merged with Viterra, and The J.M. Smucker Co. acquired Hostess Brands. Letโ€™s take a closer look at each of these transactions.

Ciscoโ€™s Acquisition of Splunk

Cisco, an American multinational digital communications technology corporation, recently announced its acquisition of Splunk. Splunk provides software solutions that enable enterprises to gain real-time operational intelligence by leveraging their data.

Cisco has agreed to purchase the company for $157 per share in cash, which amounts to approximately $28 billion in equity value. The combined entity will become one of the worldโ€™s largest software companies and is expected to accelerate Ciscoโ€™s revenue growth.

Cisco has been performing well in recent quarters, surpassing both earnings and revenue expectations for five consecutive quarters. The companyโ€™s revenue growth has been on an upward trend, as shown below.

In its most recent quarter, Q4 revenue reached $15.2 billion, representing a 16% improvement from the same period last year.

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Image Source: Zacks Investment Research

Bungeโ€™s Merger with Viterra

In June, Bunge announced a merger agreement with Viterra, aiming to create a global agribusiness company with enhanced market access and value-added solutions. The merger is expected to improve efficiency and capabilities throughout the value chains for both companies.

Greg Heckman, CEO of Bunge, stated, โ€œThe combination of Bunge and Viterra significantly accelerates Bungeโ€™s strategy, connecting farmers to consumers and supplying essential food, feed, and fuel to the world.โ€

Similar to Cisco, Bunge has achieved strong quarterly results, surpassing the Zacks Consensus EPS Estimate by an average of 20% over its last four releases. In its most recent quarter, Bunge posted a 42% EPS beat, although its revenue fell short of expectations.

As illustrated below, the market had a positive reaction to the announcement.

Zacks Investment Research
Image Source: Zacks Investment Research

J.M. Smuckerโ€™s Acquisition of Hostess Brands

J.M. Smucker, a major player in the convenience and snack foods industry, recently announced a $4.6 billion acquisition of Hostess Brands, paying $34.25 per share. This acquisition expands SJMโ€™s product offering and strengthens its presence in the convenient consumer foods segment.

The deal includes Hostessโ€™ portfolio of baked goods brands, such as Donettes, Twinkies, Zingers, and CoffeeCakes, among others.

Mark Smucker, CEO of SJM, remarked, โ€œWe are excited to announce the acquisition of Hostess Brands, which expands our family of brands and presents a unique opportunity to provide consumers with convenient solutions for different meal and snacking occasions.โ€

Investors focused on income may find SJM shares appealing, as they currently offer a solid annual yield of 3.3%. The company has also demonstrated dividend growth, with a modest 5% annual increase over the past five years.

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Image Source: Zacks Investment Research

Conclusion

Mergers and acquisitions offer various benefits to companies and shareholders, including cost savings, increased market share, and synergies resulting from the combined business.

Although M&A activity has slowed down, it remains alive. Cisco Systemsโ€™ recent acquisition of Splunk is just one example. Additionally, Bungeโ€™s merger with Viterra and The J.M. Smucker Co.โ€™s acquisition of Hostess Brands in 2023 demonstrate that there are still opportunities for strategic deals in the market.

Download the 7 Best Stocks for the Next 30 Days from Zacks Investment Research for the latest recommendations

Free Stock Analysis Report: Cisco Systems, Inc. (CSCO)

Free Stock Analysis Report: The J. M. Smucker Company (SJM)

Free Stock Analysis Report: Bunge Limited (BG)

Free Stock Analysis Report: Splunk Inc. (SPLK)

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.

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