2 Stocks Soaring on M&A Speculation

The holiday spirit continued on Wall Street on Wednesday, with major market benchmarks continuing to gain ground. The Nasdaq Composite (^IXIC -0.27%) rose almost 1%, and while gains for the S&P 500 (^GSPC -0.30%) and Dow Jones Industrial Average (^DJI 0.16%) were more measured, there was still palpable optimism among investors going into the Thanksgiving break.

Data source: Yahoo! Finance.

One trend that has picked up lately has been interest from companies looking to make strategic moves in the merger and acquisition (M&A) market. On Wednesday, both Coupa Software (COUP) and Manchester United (MANU 0.69%) experienced sizable gains on reports that the companies might be putting themselves up for sale or have attracted interest from a potential acquirer. Despite offering a quick gain, M&A deals can often be bittersweet for long-term investors who had wanted to go the distance with a promising company.

Will Vista buy Coupa?

Shares of Coupa Software jumped 29% on Wednesday. The gains came after reports suggested that a well-known private equity company might be looking to acquire the specialist in business spending-management software.

Vista Equity Partners is looking at a possible buyout of the software-as-a-service company, according to Bloomberg. As with many similar stories, the sources weren't identified, but they apparently said that Vista and Coupa have had discussions about a possible agreement. No deal has been finalized or was likely in the immediate future, and it's possible that a rival private equity company or another interested party could come forward and express interest in acquiring Coupa.

Coupa's stock has fallen sharply in the past couple of years, losing more than 85% of its value since early 2021 before the most recent jump. The decline has come as Coupa's business momentum has slowed considerably. In its most recent results for the fiscal second quarter, which ended July 31, sales were up just 18% year over year, and adjusted net income dropped by nearly a fifth from the year-earlier period.

Although short-term headwinds could continue to hurt Coupa in its growth efforts, buyout interest suggests that stock prices have fallen far enough to entice some institutional investors to take attractive businesses private. That's a trend that started before the latest news about Coupa, and it won't be the last to be the subject of takeover speculation.

Is Man U up for sale?

Meanwhile, shares of English football giant Manchester United finished higher by 26% on Wednesday. The gains follow the team's announcement that it's looking at strategic alternatives for the club.

Investors often interpret the term "strategic alternatives" as implying that a certain company is putting itself up for sale, inviting bidders who are interested in acquiring it.

Technically, though, strategic alternatives can include a host of other actions, including getting a major investor to make a new investment in the company, making a strategic alliance or partnership with another business, selling pieces of a business while retaining other parts, or spinning off portions of a business into separately traded entities.

The challenge that Manchester United investors face is that from a business perspective, the team hasn't been a huge success. The company has been unprofitable for three consecutive years, and after having dominated its league throughout much of the 1990s and 2000s, Man U hasn't won the English Premier League title since the 2012-13 season and remains outside the top four teams this season as well.

Fans want more investment in the club so that it can regain its competitive position atop English football. Yet that involvement in itself has created challenges for teams in the past, and it could complicate any negotiations for a potential Man U sale as well.