San Antonio sportscaster Dan Cook once famously noted “it ain’t over till the fat lady sings” as a caution against calling outcomes as certain when they are in fact still up in the air. It is particularly popular amongst politicians, especially those down in the polls (or super-delegate counts).
And while the general wisdom of this adage cannot be overstated and thus it would be premature to officially call it as “over” for Yahoo — or at least over for Yahoo as anyone has known it for the last two decades or so — well, it would be remiss not to notice that it seems the fat lady is seriously getting warmed up.
After years of struggle and many attempts at rebooting that mostly failed to take root, rumors about Yahoo looking for a buyer of some sort have been circulating since last April. Who that buyer might be and the structure of the deal were up for some debate. Some “close to the situation” were estimating that Yahoo was largely contemplating a sale of its core business (mostly comprised of its web properties) for $4 billion to $8 billion. There have also been rumors, again from those close to the situation, that Yahoo is contemplating the sale of some of its peripheral assets, like patents and real estate, for around $1 billion.
But now it seems the focus is on selling the whole enchilada, so to speak, as the bids are going in and the price is going down. As of last month when reports first started circulating about Yahoo and its many potential suitors, the buy price had slid into the $2 billion-$3 billion range; according to reports, last month’s sales presentations by Yahoo Chief Executive Marissa Mayer at the company’s headquarters in Sunnyvale, California, were less than enthusiasm-generating for the investment.
But bidders of all stripes are coming out of the woodwork, and as of this week Verizon is the early favorite to take it down, likely with a bid in the $3.1 billion range. This follows WSJ reports from an unnamed source that Verizon submitted a second round in that amount yesterday.
As we noted, it’s not quite over yet. Private-equity firm TPG was also widely expected to submit a second-round bid before the deadline yesterday. It also remains unknown which, if any, other bidders from the first round last month — which included Advent International, Vista Equity Partners, and a group led by Quicken Loans founder Dan Gilbert and backed by Warren Buffet — moved on to the second round. Adding to the general uncertainty, Yahoo is widely expected to hold at least one more cycle of bidding, meaning offers could change through the final round.
There’s also the fact that the reported cause of the big drop in Yahoo’s proposed valuation was the reveal at the Sunnyvale meetings last month that Yahoo’s online advertising business is declining more rapidly than once supposed.
And yet Verizon remains the favorite, and is widely considered to be the most logical buyer for Yahoo and its core.
Verizon acquired AOL Inc. last year for $4.4 billion — and given that, and its emerging business in online ads, analysts widely consider Verizon the player most able to consolidate and combine Yahoo’s web properties. While not the force it once was, those collective services attract more than 1 billion users a month. Verizon offers Yahoo its best turnaround option.
And Yahoo offers Verizon something, too — a chance to taste some of that sweet advertising revenue its mobile phones bring in. As Karen Webster pointed out in a recent commentary, Verizon and the other providers have found themselves in a position they never really wanted: a dumb pipe for services that consumers view as more or less interchangeable. Consumers are loyal to phones, providers a means to connect them.
“Carrier choice is driven by the phone that those consumers want to buy. And, consumers will shop around to get the best deal they can, thanks to number portability. Some handset manufacturers, like Apple, make it as easy as pie for consumers to do just that,” Webster noted.
But carriers don’t have an easy method of “collecting a toll” on the commerce that happens on their phone, and attempts to organically grow into the market have not really succeeded.
“And we all saw what happened when carrier-backed Softcard aka Isis tried to enter the U.S. market with a scheme that gave carriers a cut of the commerce pie. Everyone threw up on that idea.”
Can’t make money on a toll? OK, plan B. Make money on eyeballs and synergies. Between the phones people carry, the billion eyeballs the Yahoo platform brings with it and that massive cable network they run, Verizon Communications can make that big network work for it — and find a way to profit on all that commerce and advertising the old-fashioned way.
However, it remains far from a sure thing that Verizon will be Yahoo’s ultimate buyer, or even that Yahoo will have a buyer at all.
As of press time, neither Yahoo or Verizon had offered any official update on the subject.
Investments for the week ended 06-03-16
Don’t be alarmed. The $3.9 billion tally for the Investment Tracker this past week remains legitimate, and a huge boost over the anemic pace and pacing that had been seen in previous weeks and months.
FinTech was the dominant player in the week, as a sector, with almost all of the deal-making activity and with certainly everything of size and scope.
The biggest announcement, kicking off the week with a bang, was the $2.8 billion bid for Demandware, with Salesforce as the bidder (who else might you have expected)? The focus is to add digital eCommerce as a larger part of the latter’s arsenal.
You’d have to go much farther down the scale of transaction sizes to find the $163 million being shelled out for Recommind, where software as a service got its due and especially for e-Discovery and legal technology. The deal is slated to close in the first quarter of 2017. The key here is data extraction from legal documents.
The investments by geography show a telling story, with the U.S. dominant in the dominant sector of FinTech.