According to an an article published today in the Wall St. Journal, Google is considering to provide financing for a group of private equity investors to acquire Yahoo. Google will likely have a difficult time acquiring Yahoo on their own because they are currently being investigated in an antitrust case with the U.S. Federal Trade Commission concerning their search and advertising businesses. Federal regulators could potentially raise some questions about Google acquiring an internet company with a competing search and advertising business.
It is not uncommon for well funded tech company to invest in weaker tech companies. In 1997 Microsoft invested $150 million in Apple when the company was struggling and nearly irrelevant. Microsoft also made a bid to acquire Yahoo in February 2008 for $44.6 billion but the bid was rejected by Yahoo’s board.
Over the past several years, Yahoo has been struggling to gain market share over larger internet companies such as Facebook and Google. Yahoo’s profit and revenue decreased year over year during their third quarter and the company experienced weakness in sales of its online display ads and search advertising business. Microsoft has a partnership with Yahoo to operate their online search business.
During the past few days, reports have circulated about Microsoft providing financing for a group of investors such as Silver Lake Partners and Canadian Pension Plan (CPP) to acquire Yahoo. Some of the other interested groups that have been mentioned in possibly acquiring Yahoo includes KKR & Co, and Blackstone Group LP.
Google is likely concerned about Microsoft gaining and exerting more influence over Yahoo in the future. If Google finances an acquisition of Yahoo with their group of investors, it may provide fertile ground for Google to increase their online display advertising business and better compete with Facebook.
Yahoo is in the midst of transition after firing their CEO Carol Bartz. Although Yahoo has been declining over the years, the company still wields influence in the international market in the areas of sports, entertainment, and finance. Yahoo has over 700 million visits per month and a market cap of over 20 billion.
Alibaba’s Chairman Jerry Yang has said that he is interested in Yahoo’s Web portal and wants to buy back its 43 percent stake in the company. Currently Yahoo is Alibaba’s largest shareholder.