AOL Shows Interest In Buying Yahoo

Iohana Georgescu

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What could come out of a AOL-Yahoo deal; image : Mashable

After a complete revamp of its search engine and multiple attempts to keep afloat, among which even a partnership with Microsoft, Yahoo is still far from doing well. Because of this tricky situation and because AOL is far from its glory days as well, there were plenty of reports that suggested the two companies should partner up. Because they both had similar content this approach would be beneficial. Instead of splitting the number of visitors, the two companies would share them and try to solidify their position on the market.

According to a recent Wall Street Journal report, AOL and several private-equity firms are now considering the option of making an offer to buy Yahoo. This report is based on information from “people who are familiar with the matter”, and as far as we’re concerned, those people might only claim to be familiar with the talks so do take the following information with a grain of salt.

Apparently, Silver Lake Parners and Blackstone Group LP are among the firms who have shown interest in teaming up with AOL for a Yahoo acquisition. The people familiar with the situation also noted that at least two or three firms could be interested in joining the fun if a formal buyout proposal is established. They said that for the time being the discussions are preliminary and don’t include Yahoo, which means that the conversations may not lead to an actual approach.

As it usually happens with big IT companies plotting something, neither Yahoo nor AOL commented on the report. There are several scenarious currently under discussion among the buyout firms. The first regards a complex deal in which China’s Alibaba Group would buy back Yahoo’s nearly 40 percent stake in Alibaba. In this case, some of Yahoo’s other assets would be sold off to any interested company, while the remainder would be of a much smaller value meaning that the private-equity firms could get financing for it.

The second scenario involves AOL partnering up with Yahoo and combining operations, in a reverse merger after Yahoo disposes of the Alibaba stake. AOL Chief Executive Tim Armstrong has shown a lot of interest about the idea that Yahoo could buy AOL, another person familiar with the matters reveals. While it’s definitely not clear who is intending to buy who at this moment, we hope to find out what will happen soon, preferably in the form of an official press release from one of the two companies. A merger or a buy-out from the part of any of the two companies would make sense, since a combined Yahoo-AOL would definitely hold a lot more power on the web. The two combined might actually stand a chance to compete with Google, although it’s doubtful that the search engine giant will lose a lot of market share to any other company, in nearly any field of activity.

While the private-equity firms have considered a deal with Yahoo for a while, the departure of multiple important Yahoo employees in the past few weeks has managed to intensify the pressure on the company’s CEO, Carol Bartz. Since the time of her hiring, Bartz was expected to turn the company around. While she managed to improve Yahoo’s profitability by cutting costs, Bartz didn’t manage to do a lot in terms of revenue.11

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