February 10, 2016

Will Verizon buy the struggling Yahoo?

Yahoo suffered another poor quarter, along with laying off 15 percent of its workforce.

A possible end is in store for Yahoo. With yet another net loss for the last quarter a massive $4.43 billion and a 15 percent cut to its already dwindling workforce, company officials recently confirmed that the iconic multinational technology organization is seeking a potential buyout. One of the major contenders for this acquisition is none other than Verizon Communications.

Last May, Verizon purchased multinational mass media corporation AOL in a deal valued at $4.4 billion. Though instead of merging the two companies, AOL remains independent from Verizon's core business. Abigail Stevenson at CNBC wrote that this approach fits under Verizon's core, three-tier business strategy, which is "having great connectivity, owning platforms to drive traffic to its network and owning content that supports its ecosystem."

A buyout of Yahoo might fit under this existing plan. Company Chairman and CEO Lowell McAdam recently explained to "Mad Money's" Jim Cramer that it is looking into this particular business strategy.

"We have to understand the trends that we are seeing in some of their results now," McAdam explained to Cramer. "But then, at the right price I think marrying up some of their assets with AOL under Tim Armstrong's leadership would be a good thing for investors."

A potential acquisition would be beneficial to Verizon by expanding its strategy to gain an edge over market giants like YouTube and Facebook.

"Verizon appears serious about bringing the 1 billion users who use Yahoo's e-mail, video and sports sites, and finance portals into the fold," Emily Jane Fox wrote at Vanity Fair. "Verizon doesn't hurt for users it has 112 million wireless subscribers but what it lacks is its own content from which it can monetize with mobile video ads. That's where Yahoo could add value, finally helping Verizon hold ground against Facebook and YouTube."

This deal would certainly be ideal for Yahoo, that has been hemorrhaging revenue and is slashing expenses and manpower to maintain a significant profit in a competitive marketplace. Forbes' Miguel Helft reported that a large portion of this loss is due to the organization's reporting units, the largest of which is Tumblr, which the company purchased in 2013 for just over a billion.

Should this Verizon-Yahoo deal proceed, many wonder whether or not Yahoo CEO Marissa Mayer will stay on to operate the newly acquired company as CEO Tim Armstrong did during the AOL merger. Many board members have already called for Mayer's resignation due to the unpopularity of many of her business decisions, such as killing its work-from-home policy, extravagant company spending or periodic, widespread layoffs.

What will happen between Verizon and Yahoo is still left to be determined and will unfold over the coming weeks as Fox wrote "the companies have not yet had formal discussions, and no banks have been hired."

Through partnering with an M&A expert, your organization can ensure that its deal meets its projected growth needs and desires. Contact us today to learn more about our extensive experience with successful technology mergers and acquisitions, along with our commitment to working with companies to agree to the best possible deal for their current and future business needs.