{"id":788,"date":"2021-03-25T13:23:45","date_gmt":"2021-03-25T13:23:45","guid":{"rendered":"https:\/\/news25.org\/?p=788"},"modified":"2021-03-25T13:23:45","modified_gmt":"2021-03-25T13:23:45","slug":"u-s-tech-companies-use-their-expensive-stock-to-pay-for-acquisitions","status":"publish","type":"post","link":"https:\/\/www.news25.org\/u-s-tech-companies-use-their-expensive-stock-to-pay-for-acquisitions\/","title":{"rendered":"U.S. tech companies use their expensive stock to pay for acquisitions"},"content":{"rendered":"<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">(Reuters) &#8211; Cash may be king, but stock is queen in the land of technology mergers and acquisitions during a pandemic-fueled tech boom.<\/p>\n<div>\n<figure>\n<div class=\"Slideshow-inline-image-1uoB6\">\n<div class=\"BackdropImage-container-2S9Qf BackdropImage-branding-2hzhO\">\n<div class=\"BackdropImage-image-a7Ah5 AutoSizeImage-container-19DRs AutoSizeImage-cover-2sLxp\" role=\"img\" data-loaded=\"true\"><\/div>\n<\/div>\n<\/div>\n<div class=\"Slideshow-expand-button-2c_q7\"><\/div>\n<\/figure>\n<div class=\"header-image-container  full\">\n<figure style=\"width: 800px\" class=\"wp-caption alignnone\"><img loading=\"lazy\" decoding=\"async\" class=\"header-image\" src=\"https:\/\/storage.googleapis.com\/media.mwcradio.com\/mimesis\/2021-03\/25\/2021-03-25T100817Z_3_LYNXMPEH2O0PO_RTROPTP_3_TECHNOLOGY-DEALS-STOCK.JPG\" alt=\"U.S. tech companies use their expensive stock to pay for acquisitions\" width=\"800\" height=\"536\" \/><figcaption class=\"wp-caption-text\">IMAGE COPYRIGHT\/ AFP\/ Smartphone with Slack logo stands in a shopping cart on a keyboard in front of displayed Salesforce logo in this picture illustration taken December 1, 2020. REUTERS\/Dado Ruvic\/Illustration\/File Photo<\/figcaption><\/figure>\n<\/div>\n<\/div>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">Close to half the U.S. deals in the sector included a stock consideration last year, the highest percentage since 2016, versus only 27% in 2019, according to financial data provider Refinitiv.<\/p>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">By comparison, 39.5% of deals across all sectors used stock last year. The tech trend continued into 2021 as half of the deals in the sector announced in the first quarter also used stock.<\/p>\n<ul>\n<li><a href=\"https:\/\/news25.org\/covid-eu-plans-rollout-of-travel-certificate-before-summer\/\">Covid: EU plans rollout of travel certificate before summer<\/a><\/li>\n<li><a href=\"https:\/\/news25.org\/ford-enhances-its-commitment-to-road-safety-by-supporting-childsafe-pedestrian-safety-programme\/\">Ford Enhances its Commitment to Road Safety by Supporting ChildSafe Pedestrian Safety Programme<\/a><\/li>\n<\/ul>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">Company stock has even more frequently funded mega deals. The six largest technology deals in 2020 all used stock, including semiconductor maker Advanced Micro Devices Inc\u2019s $35 billion acquisition of Xilinx Inc and Salesforce.com Inc\u2019s agreement to buy messaging app Slack Technologies Inc for $27.7\u00a0billion.<\/p>\n<div class=\"AdSlot__container___2BqUD ArticleBody-ad-slot-83sCj\"><\/div>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">The popularity of stock as currency for deals has been fueled by the soaring valuations in the sector, dealmakers said. The NASDAQ 100 Index is trading at 39.5\u00a0times its price-to-earnings, the highest since 2000, as investors bet on firms benefiting from the expansion in cloud computing and remote working in the aftermath of the COVID-19 pandemic.<\/p>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">This has made acquirers keener to use their highly valued shares, rather than cash, to pay the frothy premiums that targets ask for. While an all-stock or cash-and-stock deal may dilute the shareholders of the acquirer through the issuance of new shares, it reduces the risk of it overpaying because it hinges more on the relative valuation of the two companies, rather than the absolute valuation of the target, investment bankers said.<\/p>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">\u201cIt allows buyers and sellers to participate equally in the upside or downside, as opposed to getting cashed out,\u201d said Mike Wyatt, Morgan Stanley\u2019s global head of technology M&amp;A.<\/p>\n<div class=\"AdSlot__container___2BqUD ArticleBody-ad-slot-83sCj\"><\/div>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">When identity management company Okta Inc clinched a $6.5\u00a0billion deal earlier this month for rival Auth0, it used just its shares to fund the purchase. The deal valued Auth0 at about 26 times forward revenue multiple, compared to a forward revenue multiple valuation of about 28 times revenue for Okta.<\/p>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">\u201cSome people think the deal overvalued Auth0, but it is actually lower than our multiple,\u201d Okta CEO Todd McKinnon said in an interview, adding Auth0 was also growing faster than Okta.<\/p>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">Stock deals can also come with tax benefits for the acquisition target. Deal proceeds are not taxable at the corporate level in the United States as long as stock makes up at least 40% of the purchase price consideration.<\/p>\n<p class=\"Paragraph-paragraph-2Bgue ArticleBody-para-TD_9x\">Dealmaking in the U.S. technology sector has blossomed during the pandemic. The first quarter of 2021 has seen the highest tech deal volume ever, with over 700 deals totaling $155 billion announced. Tech transaction volumes in 2020 jumped by 72% to $383 billion, Refinitiv data shows.<\/p>\n<div>\n<div class=\"Attribution-attribution-Y5JpY\">\n<p>Reporting by Krystal Hu in New York; Additional reporting by Joshua Franklin in New York, edited by Greg Roumeliotis and Richard Pullin<\/p>\n<p>SOURCE: <a href=\"https:\/\/www.reuters.com\/article\/us-technology-deals-stock\/u-s-tech-companies-use-their-expensive-stock-to-pay-for-acquisitions-idUSKBN2BH1AI\">REUTERS<\/a><\/p>\n<\/div>\n<\/div>\n","protected":false},"excerpt":{"rendered":"<p>(Reuters) &#8211; Cash may be king, but stock is queen in the land of technology mergers and acquisitions during a pandemic-fueled tech boom. Close to half the U.S. deals in the sector included a stock consideration last year, the highest percentage since 2016, versus only 27% in 2019, according to financial data provider Refinitiv. By [&hellip;]<\/p>\n","protected":false},"author":2,"featured_media":789,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[44,43],"tags":[268,269,267,266,105],"class_list":{"0":"post-788","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-business","8":"category-news","9":"tag-acquisitions","10":"tag-morgan-stanley","11":"tag-stock","12":"tag-tech-companies","13":"tag-us"},"yoast_head":"<!-- This site is optimized with the Yoast SEO plugin v22.7 - https:\/\/yoast.com\/wordpress\/plugins\/seo\/ -->\n<title>U.S. tech companies use their expensive stock to pay for acquisitions - News 25<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.news25.org\/u-s-tech-companies-use-their-expensive-stock-to-pay-for-acquisitions\/\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"U.S. tech companies use their expensive stock to pay for acquisitions - News 25\" \/>\n<meta property=\"og:description\" content=\"(Reuters) &#8211; Cash may be king, but stock is queen in the land of technology mergers and acquisitions during a pandemic-fueled tech boom. 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