Given inflated Technology company valuations and a weakening U.S. Dollar, we expect for stock swap M&A transactions to continue – especially as it relates to cross-border M&A.
The DXY Index continues to drop as the USD falls relative to the currency basket (click chart below). The U.S. economy remains soft. Companies continue to cut headcount. The Federal Reserve continues to purchase approximately $160 Billion each month (4x the pre-COVID pace), for its QE program and has signaled that QE is likely to accelerate in 2021. This is not a recipe for a strong USD. The combination of inflated Technology company valuations and a soft U.S. Dollar suggest we will continue to see stock swaps as a key component of purchase consideration in M&A transactions. The recent Salesforce/Slack and S&P Global/IHS Markit deals each incorporated stock swaps. The latter was an all-stock transaction.