This is part of our monthly pension update series. Catch up on last month’s summary here: What happened to pensions in July 2024?
Mergers and acquisitions are methods of combining companies or their major assets together. A merger brings two companies together to form a new one; while an acquisition happens when one company buys another. The bought company might keep operating on its own or become part of the buying company.
The outcome of mergers and acquisitions can influence stock prices, so investors may keep a close eye on these developments.
Historical data suggests that increases in mergers and acquisitions have often had a positive impact on the stock market. For example, during the dot-com boom of the late 1990s, a surge in mergers and acquisitions coincided with a 40% rise in the NASDAQ Composite Index.
After years of caution, this summer has seen a big return of mergers and acquisitions - in both the US and Europe.
Keep reading to find out which mergers and acquisitions have been shaking up the stock market.
What happened to stock markets?
In the UK, the FTSE 250 Index fell by over 2% in August. This brings the year-to-date performance close to +7%.
Source: BBC Market Data
In Europe (excluding the UK), the EuroStoxx 50 Index rose by almost 2% in August. This brings the year-to-date performance close to +10%.
Source: BBC Market Data
In North America, the S&P 500 Index rose by over 2% in August. This brings the year-to-date performance close to +18%.
Source: BBC Market Data
In Japan, the Nikkei 225 Index rose by over 1% in August. This brings the year-to-date performance close to +16%.
Source: BBC Market Data
In the Asia Pacific (excluding Japan), the Hang Seng Index rose by almost 4% in August. This brings the year-to-date performance close to +6%.
Source: BBC Market Data
The impact of mergers and acquisitions
When a company’s acquired, its stock price usually rises. This is because the acquiring company often pays a premium to encourage shareholders to sell their shares. For example, if Company A buys Company B, investors may expect Company B’s stock to rise as the deal is completed.
On the other hand, the stock price of the acquiring company may fluctuate. It can drop if investors believe the cost of acquiring the target company is too high or if there are concerns about integrating the two companies. The market reaction will depend on how well the merger is perceived to create value for both companies.
Company spotlight: Mars
Despite Nestlé owning The Willy Wonka Candy Company; the real chocolate giant in today’s supermarkets and corner shops is arguably Mars. This family-owned company is home of many of the UK’s household favourite chocolate brands, including:
- Mars;
- Snickers;
- Bounty;
- Twix; and
- Milky Way.
Back in November 2023, Mars expanded its chocolate monopoly with the acquisition of Hotel Chocolat. But it’s not just cocoa the company offers. Mars primarily operates in three areas: pet care, snacking, and food. This August, Mars announced the acquisition of cereal and snack company, Kellanova.
This acquisition marks a snack monopoly in the making, as Mars will now own:
- Pringles;
- Kellogg’s; and
- Nutri-Grain.
As part of the deal, Mars will buy all of Kellanova’s shares for $83.50 each in cash; which adds up to a total value of $35.9 billion for the entire company. With the acquisition of these beloved brands, Mars is poised to remain a key player in the snack market for the foreseeable future.
It’s not just good news for Mars. Following the acquisition announcement, there was a 40% increase in the value of Kellanova shares - officially making it the best performer in the S&P 500 for August. As most pensions invest in the S&P 500, it’s possible you may have benefited a little bit from this big deal.
Have a question? Get in touch!
Do you want to know more about your pension plan with PensionBee? You can check out our Plans page to learn how your money is invested in different assets and locations, or log in to your BeeHive to see your specific plan. You can always send comments and questions to our team via engagement@pensionbee.com.
Risk warning
As always with investments, your capital is at risk. The value of your investment can go down as well as up, and you may get back less than you invest. This information should not be regarded as financial advice.
