There’s been numerous news reports about Google considering “buying” Yahoo!, or at least teaming up with private equity companies to do so.
While most of the articles at least mention in passing that it’d be unlikely for this to pass government review, I haven’t seen many people actually discuss why Google is involved.
Why wouldn’t a Google acquisition of Yahoo! pass government review? Well, if the Department of Justice wouldn’t pass the search deal that Google and Yahoo! worked up in 2008 where SOME of Yahoo!’s search results were powered by Google, then why would they actually let Google take part in buying all of Yahoo!?
In fact, many thought that Google knew in 2008 it wouldn’t pass government review, but tried to do the deal just so Yahoo! would turn down Microsoft and waste a lot of Yahoo!’s internal time (and it worked). I sat in many meetings at Yahoo! that were spent talking about the tests we were running with Google and how we were going to implement the deal.
There hasn’t been enough change in search market share for anyone to seriously even think it could pass. I’m not entirely sure if Google being only part of an ownership group with private equity firms would change the government’s view, but I doubt it.
Which leaves us asking, why is anyone even taking Google’s interest seriously?
I can’t answer why anyone is taking Google seriously, besides the fact that they are one of the only players who actually have the cash to do something around Yahoo!.
It just seems like any major involvement on there part is going to just raise big red flags with the governments of the world and will never pass “go”.
Why would Google get involved then?
I feel like there are two obvious answers to this one.
- Google can pretend to at least have interest in Yahoo! to draw out how quickly something happens here. The more time Yahoo! is in limbo, and the more time Microsoft spends figuring out what to do about it, the better that is for Google to continue to separate itself from them.
- Google can go as far as even floating prices out there to try and get others (Microsoft) to feel like they have to pay more in order to get Yahoo!. The more money someone spends on Yahoo!, the better that is for Google.
I suppose it is possible that Google really does want to keep Yahoo! out of Microsoft’s hands, but it seems like Microsoft having to acquire and digest Yahoo! would just allow Google to accelerate ahead even further ahead. It’s all just a ruse to waste time by complicating matters and drive up the price. Well played Google.
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I think you need to take a step back and realize YHOO is not Yahoo. YHOO is a 40% stake in Alibaba group (and most prominently the ebay and paypal equivalents of Taobao and Alipay), a liquid stake in Yahoo Japan and then everything else.
Just the first, accounts for nearly all of the value of YHOO currently (people continue to way underestimate it).
Also, Google, from the rumors, aren’t proposing to own anything of Yahoo, they want to provide the financing. The balance sheet’s of GOOG and AAPL and others are way over bloated and traditional providers of private equity debt don’t have enough to lend to get a deal done. So assumedly, they could a return on the money lent but also exert some influence over what the parties do with it.
My guess is that Google is actually more interested in Alipay and Taobao than getting Yahoo’s remnant inventory.
That’s a decent point that Google may want the Asian assets, but what makes up the value of YHOO or what Google theoretically could want doesn’t really matter. They can’t have them.
Even if Google provides “the financing”, governments won’t like any deal where Google has any influence over decisions made about what Yahoo’s doing. There’s too much of the search market wrapped up between them.
US Government would never allow such deal to happen. Google already has so much of monopoly with its online presence. It would be a suicidal move on the part of the government to endorse any such acquisition.
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