Possible acquisition of Yahoo by Microsoft

In early September the Wall Street Journal reported on the difficulties that the Internet business Yahoo has currently been facing. One of the sources of income for a mainly Internet based company are the sales of advertisements on their website. Yahoo, as well as others such as AOL, were late to realize the impact and popularity of social networking sites and as a result the popularity of Facebook, as well as competition with Google, has caused them to struggle with advertisements. Yahoo’s percentage of the overall shares of U.S. online advertising market dropped from 16.1% in 2009 to 11% in 2011. Also, Yahoo’s total revenue fell 23% in one year’s time and now Yahoo is in danger of a takeover.

Both Microsoft and Google are the two companies in competition for the acquisition of the company. Both Companies have a lot of cash and would be able to afford to takeover Yahoo, where most private- equity firms are having difficulty borrowing enough money to make billion dollar deals, Google and Microsoft have liquid assets already available. In the case of Microsoft, one possible reason for their desire to acquire Yahoo is their current advertising deal with them. Microsoft’s Bing search engine provides search results and yahoo provides the advertisements and any change in ownership of Yahoo could be unfavorable for Microsoft. The competition with Google comes in with Google possibly wanting to get an advertisement deal with Yahoo, although the government antitrust regulations most likely discourage such a deal. Also, Google probably doesn’t want Microsoft to own Yahoo for competitive reasons making the battle for Yahoo strategically competitive.

http://blogs.wsj.com/deals/2011/10/24/who-needs-banks-in-yahoo-takeover-google-and-microsoft-play-banker/

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