Microsoft-Yahoo: How Exactly Does A Hostile Takeover Work, Anyway?

Peter Kafka | April 28, 2008 7:30 AM

In the absence of any news on the Microsoft-Yahoo front, it's time to ask some nuts and bolts questions. Such as: How exactly does a tender offer work? How about a proxy fight? If either one of these occur during the MSFT- YHOO tussle, what kind of timeline are we looking at?

Entrepreneur Marc Andreessen does the work that paid journalists haven't at Pmarca. It's a great read. Perhaps most interesting is Marc's conclusion, which makes a point that in retrospect is blindingly obvious -- so much so that no one's made it yet: The tech world, which has been largely free of hostile takeovers so far, is going to be seeing many more of these.

Historically hostile takeovers practically never happened in technology. Potential hostile acquirors assumed that hostile takeovers wouldn't work because the target company's employees would bail and the target company's business would collapse.

It turns out that as technology companies become larger and more mature, acquirors are becoming increasingly convinced that neither of these assumptions hold. Perhaps employees of large tech companies aren't that bonded to current management, and perhaps many of them would actually prefer to work for a larger, more dominant combined company. And maybe as a consequence, the target's business would do just fine in the wake of a hostile takeover -- in fact, maybe it would do better, due to advantages of combined size and scale.

My bet is that hostile takeovers, particularly of larger and more mature companies, are going to become increasingly common in our industry.

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15 Comments

Neek said:

Apr. 28, 8:08 AM

Though Andreessen nowadays is more like a slavering supplicant to the Beast of Redmond, he IS spot on, and actually makes a lot more sense than he's given credit.

Though everything about this takeover thus far had been mostly to bore you to death, fireworks are bound to ensue pretty soon, likely for the rest of the tech landscape; the kind worthy of a Larry Ellison-esque drama and theatrics.

Sebastian said:

Apr. 28, 8:29 AM

I doubt that most of Yahoo's employees _want_ to work for Microsoft, but let's be honest: Most of them have no choice - Google can't just hire a few thousand Yahoos, pretty likely many of them wouldn't fit into Google's requirements anyway.
And there are way to little start-ups hiring big numbers.

Those who HAVE a choice left already, anyway.

A yahoo said:

Apr. 28, 8:45 AM

Here is something for you to think. I know 2 colleagues who were working at a major software company with roughly similar salaries - 220k (within 5k diff). One wasn't getting good ratings for several years and was about to be laid off. He got an offer from MSFT for 280k. The other had excellent ratings but moved to Yahoo, like me, to work on greater challenges and with no raise in salary (BTW, this person has an open end Google offer for a higher salary and can move any time. In the Research world, working for MSFT is considered taking the Low Road since its research division isn't known for anything. Anyway, now if MSFT absorbs Yahoo, this person will be working in the same research group with the former colleague for a considerably less salary. Do you think, this person will stay on or leave? Most researchers are in the same boat. MSFT HAD to offer higher than market rate to get great brains but now it is trying to buy them cheap at wholesale discount though Yahoo!

Peter said:

Apr. 28, 10:30 AM

Here's a crazy idea - how about an informal survey of people who actually work at Yahoo - this does not include 'management' of any kind, of course - and find out how 'bonded' they are?

Nah, forget it. That's too communisssss.

BlogReader said:

Apr. 28, 10:40 AM

I know 2 colleagues who were working at a major software company with roughly similar salaries - 220k (within 5k diff). One wasn't getting good ratings for several years and was about to be laid off. He got an offer from MSFT for 280k.

Bullpoop he gets $220-280k for a research job at MSFT. Also if he's absorbed by the borg he'll likely get a bump in raise as MSFT can't afford to have a two tier structure if they want to keep people around.

To_A_Yahoo said:

Apr. 28, 11:27 AM

First of all, you guys must be senior and veli good, as researchers just out of schools make 120k - 140k in MSFT.

Secondly, MSFT research is probably the best in the industry, I don't know why you claim that "its research division isn't known for anything".

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