In the world of mergers, there are numerous levels of
"hostility" which characterize bids. There are unilateral
talks, mutually agreed upon, which are typically labeled as more germane, even
if one company ends up absorbing the other.
Then there are unsolicited bids, such as Microsoft's
initial offer to Yahoo, which are often labeled as "partially
hostile". On the far end of the spectrum are "fully
hostile" bids, in which one company tries to bypass another company’s
executive and board leadership by offering a buyout directly to
shareholders. Among the famous examples of takeovers considered
"hostile" was the HP
and Compaq merger, which passed by a meager 51% margin in a shareholder
Having been rejected
by Yahoo's board, Microsoft commented that it was "unfair" that
Yahoo did not embrace its "full and fair proposal to combine" the
companies. Now, Microsoft indicates it is planning to bypass the board
the issue directly to a shareholder vote. Microsoft states, "We
are offering shareholders superior value and the opportunity to participate in
the upside of the combined company. The combination also offers an increasingly
exciting set of solutions for consumers, publishers and advertisers while
becoming better positioned to compete in the online services market."
Microsoft's statement continues, "The Yahoo! response does not change our
belief in the strategic and financial merits of our proposal. As we have said
previously, Microsoft reserves the right to pursue all necessary steps to
ensure that Yahoo!'s shareholders are provided with the opportunity to realize
the value inherent in our proposal."
The decision by Microsoft to pursue a fully hostile takeover is truly a sign of
the times at Yahoo. Yahoo despite promising
big changes continues to lose
ground to Google in search engine market share, which in turn leads to
sinking advertising profits. The company dismissed 1,000 employees
recently. Yahoo aggressively
acquired companies throughout last year, but its investments left it with
little to show for it.
The hostile bid by Microsoft may nix a future board-arranged merger with Yahoo,
but at this point it may be a moot issue. If Microsoft has to, it can
simply wait out the company until it falls further towards its demise, though
it would prefer a quick merger while the company still has some vitality.
Yahoo has a lot to offer Microsoft. Despite its dropping search engine
share, Yahoo still represents a significant portion of the market and a major
market name. An alliance with Microsoft could establish a strong
competitor to Google. Further, Yahoo has a wealth of intellectual
property, domain names, and other assets that could come in handy to an
The board is left to ponder Microsoft's words, and their significant decision
-- as it may be their last.