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2008-02-03 17:09:24
Will There Be a Bidding War For Yahoo Now?
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Microsoft fired a shot heard around the world late last week when they announced that they had plans to acquire Yahoo via hostile takeover for around $31 per share.
Microsoft had reportedly finally grown impatient with Yahoo. The two companies had apparently been talking partnership or merger for years, but had never been able to get a deal done. Microsoft, watching Google leave it and the rest of the competition in the dust in terms of search engine market share, decided that enough was enough. It was time to buy Yahoo. Considering Yahoo's recent stagnation and floundering share price, Microsoft likely figured that now was the time to strike.
So the question is - will Microsoft walk away with Yahoo at $31 per share?
In my opinion - not a chance. I believe that Yahoo is far too important of a web property and brand for Microsoft to simply snatch it up at $31 per share without a major fight from other companies. I believe that there will be a bidding war for Yahoo that will likely end up valuing the shares at closer to $40 when all is said and done.
Who could possibly put in higher bids for Yahoo?
Google is obviously a strong possibility, however a Google / Yahoo merger would be nearly impossible to get past anti-trust regulators. According to my calculations, a Yahoo / Google tie-up would mean that this combined company would account for more than 80% of the total searches executed in the United States. There is a much higher likelihood that Yahoo would rebuff a Microsoft bid, and instead partner up with Google. This partnership would likely mean that Google would purchase a large stake in Yahoo and Yahoo's search engine results would now be powered by Google. The two companies have a history of working together - Yahoo used to incorporate Google's search results into their own search index before deciding to develop their own search engine.
Also I am hearing that several large private equity firms are kicking the tires at Yahoo, deciding whether or not they would like to make their own bid. I would not be surprised to hear that a private equity firm was preparing its own bid for Yahoo. Yahoo is an extremely valuable web property, and I believe that a private equity firm could do a lot to extract value from the company.
There are also other companies that are rumored to be interested, including Rupert Murdoch's News Corporation. There are also rumors that Apple and Google may team up to snatch Yahoo from the arms of Microsoft.
The next month or so will be very interesting; I would expect a piece of news regarding this planned acquisition almost daily as the chess game continues. Do you think that Google is going to sit by and let their mortal enemy suddenly have 30% total search engine market share? I don't think so. Expect some major maneuvering over the next few weeks by all companies. Yahoo's management needs to realize that there are many interested parties, and they need to milk this bidding war for the benefit of their shareholders.
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