Hold Everything! We May Get Another YHOO Bidder!*
A Valley source is hearing that a major private-equity firm was just days away from making its own bid for Yahoo when the Microsoft bomb hit this morning. (The same source now reports that TWO firms were circling, both big New York-based shops). Without Microsoft in the picture, a private-equity bid for Yahoo would have been a non-starter. Now, however, private equity suddenly looks like a white knight!If we had to guess, we would assume that Jerry Yang has spent some time on the phone with this private equity firm this morning, seeing if an effective counter-offer can be arranged. Our source does not know which firm is the one in question, but thinks its a "big Valley firm"--and, therefore, intelligently guesses Silver Lake.
Unlike a standard Valley VC firm, Silver Lake has the wherewithal and experience to do a major deal like this. The pitch to shareholders and employees would be "Let's keep Yahoo in the Valley." [Update: Our source is now hearing that it probably isn't Silver Lake, that the firm is New York-based]
Another possibility: New York-based Quandrangle Partners. Yahoo's former president, Dan Rosensweig recently joined the firm to open the Silicon Valley office. Quadrangle also has the experience and wherewithal to make a Yahoo deal happen. Rosensweig has relationships, expertise, etc., and Jerry's obviously close to him. Quadrangle also has deep media expertise.
Given Kara Swisher's report that Yahoo feels blindsided by the Microsoft offer and that Jerry is looking for any escape BUT Microsoft, a deal with either of these firms would look very appealing.
UPDATE: TechCrunch is reporting that News Corp is also frantically trying to put together a competing bid, with the help of private equity firms. This makes sense, given News Corp's previous interest in trading MySpace for a big Yahoo equity stake. News Corp can't afford to do the whole deal, but it could certainly provide some funding in exchange for some equity. So far, TechCrunch says, there are no takers.
NEW: Can Private Equity Save Microsoft From Yahoo? Unlikely
See Also:
Microsoft Insider on brand, retention, competitive offers, and Yahoo reaction
Complete Coverage: Microsoft's Bid For Yahoo!
Bidding War for Yahoo? We Doubt It
Microsoft Conference Call: No Color on Yahoo Reaction
Analysis of Microsoft Bid for Yahoo: Brilliant Move, Deal Going Through
Micro-Hoo: Combined Financial Performance (including cost synergies)
Microsoft Letter to Yahoo Board
Your spot on. I was also thinking Silverlake would make sense. (also eBay and Amazon)
A few years down the road a Cisco-like would have been anquirer. May sound crazy, but, it's not far fetched.
Your days have been numbered since the $400 amazon.com call.
Fascinating coverage. Even though I'm not sure yet how much stock to put in what you've written, I've visited here at least a dozen times today. Easily the best coverage, and not all drivel and rehashing what others say.
Started last night with your GOOG coverage (love the model BTW) then woke up to MSFT-YHOO.
So, I'm hooked, but not sure if this is "Valley Wag Finance" or something better. Think it was your Yahoo! story about "strong" results that has me wondering. But, hell, I'll be back just to see what you've got.
How about hiring more ex-analysts and turning this into something?
Thanks for the kind words (and for stopping in so often!) Yes, got some info on the Yahoo quarter that turned out to be partial-info. Went with it because it jibed with some other things I'd heard. Can't stand being wrong like that and now very wary of the word "strong."
We'll definitely keep building the site. Long way to go (and a couple more sites coming).
They must be discussing it now?
What are your opinions on that possibility please
More here:
http://www.alleyinsider.com/2008/02/bidding-war-for-yhoo-msft-to-up-offer-doubtful.html
Entrepreneurs beware Microsoft buying Yahoo could shut down the tech startup scene. It could send the startup climate back to 2001 levels - nuclear winter shut down. I lived through 2001-2004. It was ugly.
Efficiency for Microsoft means leverage with suppliers. Translation: Startups are suppliers and Microsoft just became Walmart. This could have a chilling effect on the VC and tech investment community. This new industry structure puts even more of an emphasis on ‘hits’ or category specific deals. If the Venture Capitalists are confused today can you imaging what they will do going forward. This could get ugly.
Advice for Technology Startups and VCs: Understand where your company is in the pecking order in this war. If you’re not an arms dealer then you might want to rethink your strategy.
Henry: keep on blogging
http://furrier.org/2008/02/02/entrepreneurs-beware-yahoo-buyout-could-kill-technology-startups-advice-be-an-arms-dealer/
OK.. so we are waiting to hear on Private Equity and now possibly News Corp (techcrunch.com)...
What about foreign interest... BAIDU????
John, I actually don't think this combo would chill start-up activity. On the contrary, I think you'd see a lot of talent run screaming to start-ups, loathing the idea of being Employee No. 78,645 (and realizing that, post-retention bonus, there isn't that much equity upside).
Also, no matter how talented and powerful, big companies usually miss small start-up opportunities--if only because they aren't big enough to move the needle. A $50 million opportunity is enough to make 30 people at a start-up dynastically wealthy. It's not even a rounding error at Microsoft.
What killed start-ups from 2001-2004 was the public market crash. The same thing threatens to do the same now, but I don't think Microsoft-Yahoo will have much impact on that. With money harder to raise, employees may relish the thought of working for a company with infinite cash flow for a while, but in a few years, the cycle will turn again, and start-ups will start to thrive.
Microsoft integrating with Yahoo is a huge risk: http://fishtrain.com/2008/02/01/microsoft-is-their-own-downfall/
My take: Microsoft will get their way and pay not a single cent more than their offer, or possibly even lower. If the Yahoo board tries to scuttle the offer, the inevitable shareholder lawsuits will bankrupt every single director of the company. Yahoo's underperformance has sealed their fate. The victory for Microsoft will be pyrrhic, and indeed Ballmer will become synonymous with managerial incompetence in B-schools everywhere, but he will have his Yahoo and the opportunity to squander Microsoft shareholders' money on his Ahab-like fixation on Google.