Speculations grow as Google plans to buy Yahoo

There has been a speculation over megadeal worth billions as Google plans to buy Yahoo.

WSJ stated that Google Inc has approached two private firms and help them financially for a deal to buy Yahoo’s core services. The magazine also stated that Google is still in the early stages of the conversation and there is a possibility that at the end, Google won’t end up making a bid.

Yahoo advisers Goldman Sachs and Allen & co informed interested parties of a “no cross talk” provision, a part of non-disclosure agreement that should be signed to get access to Yahoo’s sensitive financial data. This has given yahoo a more control over strategic review keeping the competitive tension in bidding. This has annoyed several potential buyers and they refuse to sign the non-disclosure agreement.

The two most likely reasons for Google to buy Yahoo would be –

  • Google might shut the company down as it did to its previous competitors or it is trying to break the bond between Microsoft and Google and make deals difficult by getting into game of driving up acquisition costs.
  • Google is interested in selling advertisements across Yahoo’s websites owing to its high traffic and since it struggled to get good prices for it.

Yahoo’s display-ads that includes graphical, interactive video ads is a whooping two billion annual business. But Yahoo’s revenue has been falling since its rivals Google and Facebook are gaining market shares. Though Google is world’s number one player in web searcher it is still a small but growing competitor in the display-ad market. Also, any deal involving Google would bring other opportunities. For instance Google+ can be brought to Yahoo’s audience as the later has almost 700 unique million visitors every month.

Even the software giant Microsoft is considering a team bid. Though Microsoft made an unsuccessful attempt to buy it in the year 2008, now it is not planning for full ownership of Yahoo, it is trying to act as a financier as Yahoo has been unable to increase its revenue although the internet market ad grows more than 20% annually. Quoting some un-named sources the wall street journal said, “Under the proposal being discussed Microsoft would put up several billions of dollars for funding with additional financing being arranged by banks“.

And owning a chunk of preferred stock in Yahoo would allow Microsoft to regain the investment before owners of common stock and other types of investors. Over the last few weeks private equity firms such as Silver Lake, Bain capital, providence equity partners and Hellman & friedman LLC have made efforts to partner among themselves or some potential strategic buyers like the Chinese e-Commerce giant Alibaba and Microsoft.

With all these rumors we have to wait and watch what is going to happen. Yahoo may have a large number of users and a lot of content with equity in brand. But its equity is not going to be helpful this time.

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