No, you wouldn't. You'd put in a much lower offer, wait for a response, and raise your offer if necessary. When you become well off because your smart, but stop doing the things that made you well off when you get there, bad things happen.
yeah, actually i would. The "typical" way to negotiate would be to go through the whole, underbid, overbid, stand off, etc etc come to terms. BUt what I'm saying is that sometimes there is a benefit to skip all that used car sales crap, especially when you have endless pockets. Plus, i'm that the aquisition team has spent months analyzing and crunching numbers. Figuring out the value that yahoo could add and the value of their brand, etc etc... MS was going to pay significantly moire than the stock was trading, regardless. oh, and MS didnt get where they were by lowballing people and drawing out long negotiations...they got they by swooping in, making a generous offer and closing the deal before people knew what hit them.
That letter from Ballmer to Yahoo's board is a thing of beauty. I really like the directness of it, bottom-lining the proposal in the first paragraph, with no fluff.
In a great advise -- bad timing -- way, an investment house, whose analystis I read issued a buy recommendation on Yahoo this morn with a target price of $31. This was before the offer came out. Too bad nobody got to act on that advise.
This reminds me of the AOL/Netscape merger. AOL ran a great product literally to its death. I guess its a matter of time before FireFox gets sold to one of the evil companies.
Well, you are way in the minority. Most rich people I know got that way for a reason, and would try and pay as close to FMV as possible. Microsoft overbid. It'll be a while before we know for sure, though.
Other companies have been interested in Yahoo though as well. If you offer less, you risk those companies jumping in and dragging this thing out. It's the same as Murdoch making some crazy offer for the Wall Street Journal - it was so far above what anyone else could reasonably offer that it forced them to accept it and prevented any other buyers from getting in the mix. That has a lot of value depending on Microsoft's plans and timing needs.
Yahoo was trading at around 30 just a couple of months ago...Do you think the company lost that much intrinsic value in 2 months? The premium on top of that is probably just to create good will, as I am guessing Microsoft will retain lots and lots of Yahoo employees. Also, Yahoo is still the #2 search engine in the United States, and #1 in many other countries.
Hostile takeovers and valuing companies is not like buying a used car - there is a lot more to it than just bargaining and splitting the difference.
This story is almost a year old, but is still relevant today. Report: AT&T may scale back Yahoo partnership March 09, 2007 Feeling that its partnership with Yahoo yields fewer benefits than in the past, AT&T wants to trim the deal's scope and seek more favorable conditions for itself, The Wall Street Journal reported Friday. Specifically, AT&T seeks a revision of how the companies share ad and Internet access revenue in their years-long agreement to sell co-branded broadband services to consumers in the U.S., the Journal reported, quoting anonymous sources. Negotiations have already begun for renewal of the pact, which ends in April 2008 and which Yahoo originally struck in 2001 with AT&T predecessor SBC Communications Inc. Back in 2001, AT&T needed Yahoo more than it does today to market its broadband services to consumers, because broadband is now in higher demand, the article states. Yahoo gets between $200 million and $250 million in annual revenue from the partnership, and could see its bottom line affected if those payments were reduced, according to the Journal. The profit margins on these AT&T fees are generally higher than the margins Yahoo enjoys from its other operations, the paper said. More indirectly, traffic to Yahoo's Web sites and usage of its services could be affected if the pact is scaled back, the Journal said. The joint customers obtain, along with the AT&T broadband connection, a suite of Internet tools from Yahoo, including e-mail accounts, PC security software, a photo management application and exclusive videos. Industry analyst Rob Enderle of Enderle Group doesn't find the news surprising. "I don't think Yahoo is providing AT&T with that much value and I'm not convinced that Yahoo is getting that much value from AT&T," he said. In 2001, AT&T needed an Internet company to partner against the combination of the newly merged AOL and Time Warner Inc., but the once popular trend of selling Internet access along with online services has pretty much disappeared, Enderle said. "Now AOL is nowhere near the power it once was, and people are shopping for their Internet connection separate from their [online] services. The need to have both [tied] has gone away," he said. Meanwhile, AT&T hasn't helped Yahoo much to combat the rise of Google, Enderle said. "Like anything else, partnerships are formed when there is an advantage and they tend to fall apart when that advantage goes away. Here, the market conditions that created the partnership in the first place have largely evaporated," Enderle said. Asked for comment, AT&T sent a joint statement that says the companies have "the most successful partnership in the industry" thanks in large part to the ongoing dialogue they maintain. "Though it is not appropriate to speculate on future plans, we frequently collaborate on our existing partnership to ensure that we deliver the most innovative broadband experience to our customers now and in the future," the statement reads. Later, Yahoo sent another statement, blasting the Journal's story as being based "on rumor and speculation" and saying that this month, the companies will introduce ads on their cobranded mail service. Later this year, Yahoo services will be added to AT&T's Internet television offering, and discussions are ongoing about expanding the partnership to the mobile space, Yahoo said. "Both AT&T and Yahoo are constantly monitoring and evaluating the Internet landscape and have already made adjustments over the years to reflect competitive conditions and the relative benefits each party brings to the relationship," the statement says.
But Google is now in talks to form a partnership with Yahoo!..... http://news.yahoo.com/s/nm/20080203/wr_nm/yahoo_microsoft_alliances_dc SAN FRANCISCO (Reuters) - Yahoo Inc would consider a business alliance with Google Inc as one way to rebuff a $44.6 billion takeover proposal by Microsoft, a source familiar with Yahoo's strategy said on Sunday. Yahoo management is considering revisiting talks it held with Google several months ago on an alliance as an alternative to Microsoft's bid, which, at $31 a share, Yahoo management believes undervalues the company, the source said. A second source close to Yahoo said it had received a procession of preliminary contacts by media, technology, telephone and financial companies. But the source said they were unaware whether any alternative bid was in the offing. Few natural bidders exist beside Google that could engage in a bidding war, and Google would be unlikely to win approval from antitrust regulators, some Wall Street analysts said on Friday. Yahoo's efforts to find an alternative bidder could simply be a measure to pressure Microsoft to boost its bid, which valued Yahoo at $44.6 billion when first announced on Friday. Sanford C. Bernstein analyst Jeffrey Lindsay wrote in a research note that "the Microsoft bid of $31 is very astute" because it puts pressure on Yahoo management to take actions that could unlock the underlying value of Yahoo assets, which he estimates are worth upward of $39-$45 a share. Separately, Google Inc fired back on Sunday at Microsoft Corp's bid to acquire Yahoo Inc, accusing Microsoft of seeking to extend its computer software monopoly deeper into the Internet realm. David Drummond, a Google senior vice president and its chief legal officer, said in a blog post that the combination of Microsoft and Yahoo could undermine competition on the Web and called on policy makers to challenge the combination. Microsoft responded to Google's arguments by saying that a merger with Yahoo would create a "compelling number two competitor for Internet search and online advertising" to market leader Google. "The alternative scenarios only lead to less competition on the Internet," Microsoft General Counsel Brad Smith said in a statement. Drummond argued that Microsoft's power stems from decades- old monopolies in Windows -- the software operating system used to control most personal computers -- and Internet Explorer, which is the dominant browser consumers used to view the Web. Microsoft's proposed merger with Yahoo would combine the No. 1 and No. 2 suppliers of Web-based e-mail, instant messaging (IM) and portals, which act as starting points for hundreds of millions of users seeking information on the Web. The Google executive argued in an official blog post that Microsoft could be looking to favor Microsoft and Yahoo services by pushing customers to other Web services they own instead of letting customers elect to use rival services. "Could a combination of the two take advantage of a PC software monopoly to unfairly limit the ability of consumers to freely access competitors' email, IM, and Web-based services?" Drummond said in a blog at http://googleblog.blogspot.com/. In making its case for the deal during a conference call on Friday, Microsoft executives said Google -- not Microsoft -- was the one company antitrust regulators were likely to bar from buying Yahoo, based on Google's dominance in Web search. Microsoft executives cited industry data showing Google has a 75 percent share of worldwide Web search revenue. Collectively, Yahoo and Microsoft attract around 20 percent of Web searches, Internet measurement firms show. "Today, Google is the dominant search engine and advertising company on the Web," Smith said in replying to Google on Sunday. "Google has amassed about 75 percent of paid search revenues worldwide and its share continues to grow." A person familiar with Google's thinking said the company believes Microsoft is using the same playbook it did in the 1990s to switch Windows users away from Web browser pioneer Netscape Communications to its own Internet Explorer. "It is the same old story," the source said.
you don't got to tell me...as it's basically my job to value companies. Yahoo is still only trading around $28.50...says something. Microsoft traded down over 6% on the announcement. Says something. Since the beginning of 2007, Yahoo has only traded (adjusted close) above $31 on 32 out of 272 trading days (11%). Since beginning of 2006, 135 of 523 trading days (26%). Since beginning of 04 and05, that ratio is closer to 50%. Which tells me that Yahoo has been slowly becoming less and less valuable, according to the market, as it loses ground to the 2000's versions of itself. Add in the economic indicators leading to continued economic slowdown (recession?), the market overall, etc., etc. And, IMO, Microsoft overbid. Again, time will tell, but that's my opinion.
See, you're just taking a snapshot, but Yahoo shareholders don't have the same view. $31 migh seem like a lot based on the closing price of yahoo! on Thursday. However, if I was a longtime shareholder (which most of the large shareholders are), and my yahoo shares were trading at over $40 two years ago and $33 as recently as last fall, it does not seem quite that extravagant - in some cases I might even be taking a loss. Add to that the purpose of an unsolicited bear hug letter - to put pressure on the board to sell, and to do it quickly, and you have to pay a large premium to make it worth anyones while. lowballing them is not going to work here. As for the fact that yahoo is "only" trading at 29.33 - that's $10 more than it was trading for before the offer - you are tellilng me that this "lack" of an increase really says something to you? When an acquisition is announced, share prices trade almost up to the proposed sale price but are discounted slightly to reflect the possibility the merger won't go through. This happens routinely.
No...I see what you're saying and agree. I just think Microsoft could have bid less and still put pressure on Yahoo's board to accept the offer. Merger announcement arbitrage exists because investors are taking bets on whether or not they think an announced deal will actually close, and at what price. Over the last few years, you'd be just as likely to see shares trade above the announced merger price then below. If Microsoft bid $31, and arb. traders out there thought it likely they'd be outbid, Yahoo would be trading above $31 now. The fact that it's below, of course, tells me something....first, that investors do think they were undervaluing Yahoo before, and second that if a transaction is going to take place, it will likely be less than the $31 offer. As to Yahoo shareholders taking a loss, or feeling underpaid. Sure, some of them might. But as a buyer, I'm more interested in fair value, even if I really want to entice the selling shareholders to sell. If Microsoft waited another 6 months and Yahoo continued to trade down, as it has been doing since late 2007, they could have still paid the 61% premium and had a much lower bid. Would Yahoo have traded down? Who knows? Would someone else....maybe even a big PE group might have made a bid. Maybe they would have just started trading up. What I'm saying is: (1) IMO, Yahoo would have continued to trade down, making them a cheaper acquisition candidate, and (2) Microsoft could have bid less and still made it a very enticing offer - may not seem like a lot, but if Microsoft offered closer to the current $29 price than their $31, that would have saved what, $4+ billion. All this said, Microsoft is still a relatively cheap tech play. Good fundamentals. Plus, they DO know what they're doing. They should be able to fold in some of the key parts of Yahoo into their business and sell of some of the other assets to recoup some of that purchase price. Probably a lot of synergies there, plus Yahoo finally gives Microsoft that web presence. On the other hand, there is a reason Yahoo has been slowly losing value for the last 2+ years. In the end, Microsoft can afford to pay it, so who knows.
I'm looking at a list of 96 pending deals and I only see three where the company is trading above the offer price.
It is possible that Yahoo could be trading at a lower price 6 months from now and Microsoft could save $4+ billion, but that would mean a significant delay in implementing whatever plans that Microsoft has for the Yahoo acquisition. Even with Yahoo and Microsoft combined, they are still behind Google in online searches and the associated advertising revenue. If Microsoft is going to even have a chance of chipping away some market share from Google, better they get started now rather than 6 months later.
it's not just a cash deal. it's cash and stock. i think it is like 90% stock...i am too lazy to look it up. and fwiw you don't normally see stocks trade above the buyout price. in fact, it's pretty rare that you do see them trade above.
