2. Contents
ACKNOWLEDGEMENT............................................................................................................. 1
What is an 'Acquisition'..................................................................................3
Why Make an Acquisition? ............................................................................3
Acquisition of YAHOO by VERIZON!.......................................................................................... 3
YAHOO.....................................................................................................................................4
VERIZON.................................................................................................................................4
ACQUISITION Process.................................................................................................................... 5
Whywastheacquisitionmade?..................................................................................6
Whydid thetarget agreetobe acquired?........................................................................6
Whydid the Acquirer see inthe Acquired?......................................................................6
Whyisthis acquisitioninteresting to study?....................................................................7
Potential valuecreation/or value destruction...................................................................7
Future ofthis Deal ................................................................................................9
References:.......................................................................................................10
ACKNOWLEDGEMENT
First and foremost, we would like to thank to our Faculty, Ms.Amisha Mehta for
the valuable guidance and advice. She inspired us greatly to work in this
3. project. Her willingness to motivate us contributed tremendously to our project.
We also would like to thank her for showing us some example that related to the
topic of our project.
Finally, an honourable mention goes to our families and friends for their
understandings and supports on us in completing this project.
-
Abhishek Gupta
Nikhil Singh
(DFT-6)
4. What is an 'Acquisition'
An acquisition is a corporate action in which a company buys most, if not all, of another
firm's ownership stakes to assume control of it. An acquisition occurs when a buying
company obtains more than 50% ownership in a target company.
As part of the exchange, the acquiring company often purchases the target company's stock
and other assets, which allows the acquiring company to make decisions regarding the newly
acquired assets without the approval of the target company’s shareholders. Acquisitions can
be paid for in cash, in the acquiring company's stock or a combination of both.
Why Make an Acquisition?
Companies perform acquisitions for various reasons.
They may be seeking to achieve economies of scale, greater market share,
increased synergy, cost reductions, or new niche offerings.
The purchased business will already have its own personnel (both labour &
management), a brand name and other intangible assets, ensuring that the acquiring
company will start off with a good customer base.
Acquisitions are often made as part of a company's growth strategy when it is more
beneficial to take over an existing firm's operations than it is to expanding on its own.
When an industry attracts too many competitor, companies may look to acquisitions
as a way to reduce excess capacity, eliminate the competition, or focus on the most
productive providers.
Acquisition of YAHOO by VERIZON!
US telecom giant Verizon Communications has bought Yahoo's search and
advertising operations for $4.83 billion on 25th July, 2016.
This marks an end of Yahoo!
In past, many companies tried to acquire yahoo but yahoo refused.
One of them was Microsoft, who made an unsolicited bid to acquire Yahoo
for US$44.6 billion in 2008.
5. YAHOO
Founded in Jan. 1994 by two Stanford PhD candidates, Jerry Yang and David Filo
Yahoo was the original guide to the Internet, connecting users with their passions and helping
them to discover the mystery and promise of the World Wide Web.
Marissa Mayer,a former Google executive, serves as CEO and president of the company.
Type of site Public
Headquarters Sunnyvale,
California, U.S.
Industry Internet
Computer software
Revenue $ 5.16 Billion (2016)
Employees 8500 (2016)
VERIZON
Verizon Communications, Inc. (simply known as Verizon), is an American multinational
telecommunications conglomerate and the largest U.S. wireless communications service
provider. It operates America’s most reliable wireless network, with 112.6 million retail
connections nationwide.
6. The company also provides communications & entertainment services over America’s most
advanced fiber-optic network, & delivers integrated business solutions to customer
worldwide.
Type of site Public
Founded October 7, 1983
C.E.O. &
Chairman
Lowell McAdam
Headquarters 1095, Avenue of the Americas
New York City, New York
Industry Telecommunications
Mass Media
Revenue $ 125.98 Billion (2016)
Employees 1,62,000 (2016)
ACQUISITIONProcess
1st step
Transfer of any assets related to Yahoo business to a singular subsidiary. This includes the
stock in the business subsidiaries that make up Yahoo that are not already in the single
subsidiary, as well as the odd assets like benefit plan rights. This is what is being sold to
Verizon.
Not Included:
Excalibur Portfolio-Yahoo oldest patents
Yahoo Japan
Yahoo stakes with Alibaba
10 Billion cash
Yahoo convertible notes, minority investments such as Snapchat
2nd step
Yahoo will sell the stock in the single subsidiary to Verizon. At that point, Yahoo will change
its name to something without “Yahoo” in it.
Shareholders:
Because it is a sale of a subsidiary, the $4.8 billion will be paid to Yahoo. Its shareholders
will not receive any money unless Yahoo pays it out in a dividend (after paying taxes).
Instead, Yahoo shareholders will be left holding shares in the renamed company.
7. VERIZON Yahoo
Verizon’s Yahoo will then be run under the same umbrella as AOL. It is unclear whether
there will be a further merger of the two businesses after the acquisition. Plans for Yahoo still
unclear because it is under-process.
Whywastheacquisitionmade?
Yahoo was never really able to adapt its technology and culture for a post-2000 internet that
was focused on social media and mobile devices, and so it steadily fell behind rivals such as
Google and Facebook.
Verizon wants in on the content game
One of the reason is that, Verizon was a strong candidate to acquire Yahoo. Verizon bought
another struggling internet company, AOL, last year. And AOL has a lot in common with
Yahoo. So the lessons Verizon learned from its AOL acquisition could prove valuable as
Verizon digests Yahoo.
Whydidthetarget agree to beacquired?
1. Yahoo facing a perpetual media/tech identity crisis
Yahoo never had the same kind of obsessive focus on recruiting technical talent.
Yahoo created technology products that people use and media properties that have
an audience, but its attempt to be a technology company and a media company
simultaneously resulted in an organization that was less than the sum of its parts.
2. Yahoo's core business seemed to be worth less than nothing
Yahoo's media and tech businesses were overshadowed by a third line of business:
venture capital.
Yahoo invested $1 Billion in AliBaba and had around 35% stake in Yahoo Japan.
From then, it was trying to revive its business.
WhydidtheAcquirerseein theAcquired?
VERIZON is highly interested with yahoo’s technology & web properties. Deal will
create a new rival in mobile media technology over 1 billion users, with an unrivalled
roster of the world’s most beloved brands.
The addition of Yahoo to Verizon & AOL will create one of the largest portfolios of
owned & partnered global brands with extensive distribution capabilities. Combined,
AOL & Yahoo will have more than 25 brands in its portfolio for continued investment
& growth.
8. Whyis this acquisitioninterestingtostudy?
While Yahoo’s search function, it’s News, Finance and Sports channels are all still
very popular, and help the company get about a billion monthly visits. These high-
traffic resources have been important for Yahoo’s presence over the years, and will
now benefit Verizon’s reach, traffic and ad revenue.
Verizon have been pushing their own short-form mobile video content service, 'Go90'
past last year. Verizon knows they’ll need a major injection of video content to
compete with the likes Netflix, Hulu and Amazon.
They needed a better platform to release its video content on. They knew that behind
every successful and engaging video is the right platform that connects the content
with the audience.
Potential valuecreation /orvaluedestruction
Yahoo shares look undervalued in the wake of company’s expected move to sell its core
business to Verizon.
The shares fell $1.06 (2.7%), to $38.32 in trading, in the wake of the deal announcement
reflecting dis-appointment with the headlines sales price. Moreover, it may take 12 to 18
months to fully unwind Yahoo, which will consist of a pile of cash& valuable stakes in
Yahoo Japan &Alibaba following the sale of core business, which is expected to close in 1st
quarter of following year.
Enhancingthe Acquirer'sCompetitiveAdvantage
Verizon Strengthens 5 Major Areas Following Its Acquisition of Yahoo.
9. 1. Mobile
Like all tech companies, mobile's been a major focus for Yahoo in recent years, and
the company claims to have 600 million monthly users.
Combined with Verizon's 100 million wireless customers and a trove of data on
consumers' whereabouts and habits, the Yahoo acquisition means that AOL can
theoretically take on digital juggernauts Facebook and Google.
2. Native and search ads
Yahoo still has more than one billion monthly users—a significant audience for AOL
in terms of both content and advertising potential.
Yahoo's flagship search product is a self-served ad platform called Gemini that
marketers can target with native and keyword-based promos.
3. Targeted video ads
As AOL looks to beef up its mobile video efforts through its Go90 streaming app with
exclusive content from media brands and creators, BrightRoll—Yahoo's
programmatic video platform—is potentially one of the most interesting assets
Verizon is getting.
4. Tumblr's millennial audience
Yahoo paid a whopping $1.1 billion for Tumblr in 2013 to reach its rapid fan base of
millennial who love its creative posts.
3 years later, Yahoo has been slow to roll out new features and more sophisticated
types of ad targeting.
5. App analytics
Mobile app analytics company Flurry is another one of Yahoo's acquisitions.
After buying the mobile player in 2014 for $300 million, Yahoo began plugging
Flurry into its ad network, letting advertisers measure how many people actually
visited a store after seeing a video ad.
AcquirerhavingParentingAdvantage
After the Verizon acquisition, signature Yahoo properties like its search engine, email
service, photo sharing site Flickr, and blogging platform Tumblr will presumably
continue operating.
Verizon is in a process of building a portfolio of online content, with their successful
acquisitions of Yahoo & AOL.
Verizon has the ability to track users’ online behavior perhaps even more broadly than
Google and Facebook do—including their location. Combining Verizon’s tracking
abilities with Yahoo and AOL’s audience and ad technology, and they will have the
makings of a potential powerhouse.
10. MajorPitfalls
In its quest to avoid a Yahoo-like decline, Verizon risks repeating one of its key
mistakes.
Verizon executives reportedly feel that Yahoo’s value has been diminished by the
hacks, which could adversely impact future growth in user accounts.
Yahoo, too, sought to fight irrelevance through diversification. But in the process of
tacking on acquisitions, it lost sight of its identity.
Yahoo bring their own acquisition disaster stories.
With Yahoo we have a litany of failed acquisitions: Broadcast.com for $5.7
billion, Geocities for $3.6 billion, Tumblr for $1.1 billion.
Benefits ofthisDeal!
Verizon has now become the 3rd-largest digital platform for online advertising
following the acquisition of Yahoo.
Since the acquisition, Verizon has added a no. of other advertising-related businesses,
including most of Microsoft's ad-technology operations and an ad-technology
company called Millennial Media.
For Verizon, the deal paves the way to assembling a new media empire capable of
delivering potentially billions in advertising revenue and offsetting slowing growth in
its wireless and wire line business units.
Yahoo’s widely distributed content capabilities will provide Verizon with the
ability to both expand their digital advertising endeavours and continue to reach wider
(and younger) audiences.
FutureofthisDeal
The US telecoms giant is expected to merge Yahoo with AOL, to create a digital
group capable of taking on the likes of Google and Face book.
Verizon bought AOL last year for US$4.4 Billion.
Yahoo will change the name and become publicly traded investment company.
This deal helps Verizon to expand its market and it attracts all the loyal customers to
Verizon.
Under Verizon, a merged Yahoo–AOL makes sense. Their combined traffic would
make them the largest digital media company in the U.S., ahead of Google.
11. Overallassessment ofthe deals
Yes, this deal is advantageous to Verizon as this deal has provided hike in the market
value share of Verizon.
The company is benefitted with the acquisition as yahoo has provided a major
platform to Verizon’s video gallery and has boosted the growth of the company.
The value of company share has been greatly benefitted by the acquisition.
References:
https://www.nytimes.com/2016/07/30/business/dealbook/yahoos-sale-to-verizon-
leaves-shareholders-with-little-say.html?_r=0
http://www.investopedia.com/terms/a/acquisition.asp
https://www.forbes.com/sites/greatspeculations/2016/07/25/verizon-buying-yahoo-
analyzing-the-benefits-and-challenges/#19e59cef5f81
http://www.adweek.com/digital/verizon-strengthens-5-major-areas-following-its-
acquisition-yahoo-172653/
https://qz.com/747309/verizons-acquisition-of-yahoo-is-a-marriage-of-incompatible-
cultures-and-it-wont-end-well/
