February 27, 2014

From Law360

by Karlee Weinmann

Facebook Inc.'s recent $19 billion WhatsApp purchase made it the latest winner as rebounding equity markets buoy deal-making prospects for publicly traded tech titans allowing them to tap into their increasingly attractive stock to back landmark transactions that experts say could otherwise be virtually untouchable.

Banks generally dig into a prospective borrower's basic stats - like its hard assets and its earnings before interest, taxes, depreciation and amortization - to gauge whether a requested loan is a safe et. As lenders prove reluctant to look past that conventional rubric, dipping into stock becomes a more alluring strategy for tech buyers.

"If you're buying a company where you're valuing it based on clicks or eyeballs or users or some other metric which either has only begun to drive a profit model or only begun to be monetized, it's hard,"said Michael Rosenthal, who represents growth companies for Polsinelli. " Banks are not long-term investors. Banks are short-term players."

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