Mondelez International Inc (MDLZ), Tiffany & Co. (TIF): How to Profit From the Upcoming M&A Boom?

In spite of low interest rates, rising equity prices, and general economic improvement, mergers and acquisition activity has remained relatively weak for the past few years. Although we have seen a few deals surface this week, we, at Valuentum, believe activity could accelerate in the coming months, especially if companies begin to recognize the possibility of rising interest rates, as outlined in the following piece: “The Impact of the US Housing Recovery Cannot Be Underestimated.” Let’s take a look at some possible targets.

Mondelez International Inc (NASDAQ:MDLZ)

After going public via a spin-off from Kraft Foods Group Inc (NASDAQ:KRFT) just last year, Mondelez International Inc (NASDAQ:MDLZ) has already garnered attention as an acquisition target. Given the simplicity and historical legacy of many of its brands, including Nabisco, Oreo, Cadbury, and Trident, as well as the company’s exposure to emerging markets, we believe the company will garner a lot of attention from suitors for a potential merger.

Over the course of history, the brands of Kraft Foods Group Inc (NASDAQ:KRFT) and Nabisco have been favorite acquisition targets. In fact, Kraft itself began as a roll-up strategy. We don’t anticipate that former owner Altria Group Inc (NYSE:MO) will be interested in making a bid, but we do believe snack and beverage giant PepsiCo, Inc. (NYSE:PEP) could be a suitor. In our view, several synergies exist between PepsiCo, Inc. (NYSE:PEP)’s enormous Frito-Lay snack business and Mondelez International Inc (NASDAQ:MDLZ)International Inc (NASDAQ:MDLZ). CEO Irene Rosenfeld used to hold the chief executive position at Frito-Lay, making negotiations likely to occur. More importantly, we think Pepsi has an expertise in the emerging markets that Mondelez International Inc (NASDAQ:MDLZ) relies upon for growth.

Of course, an acquisition of Mondelez International Inc (NASDAQ:MDLZ) would be nothing short of a blockbuster for Pepsi. Even the “smaller” Mondelez International Inc (NASDAQ:MDLZ) currently sports an enterprise value of $71 billion. Any deal for the company would likely require a substantial equity portion. Still, shares of Pepsi have lagged both the S&P 500 and the Dow, suggesting a bold move could be in order.

Tiffany & Co. (NYSE:TIF)

Consolidation is a long-term trend in the luxury space, and American retailer Tiffany & Co. (NYSE:TIF) looks like it could be next. With an enterprise value of $10 billion, Tiffany & Co. (NYSE:TIF) is small relative to its European peers, and it has not pursued the same conglomerate-like growth strategy.