In the current economy where technological advancement and stiff completion is the order of the day, different companies have been forced to merge or acquire other companies to enhance their competitive advantage and maximize their net worth. These mergers and acquisitions have not been easy and have pushed other companies into hostile takeovers. Also, some of these expansion strategies have failed due to poor negotiation skills or failure to understand the costs involved during acquisitions or a poor understanding of the target company. Other than the need for diversification and stemming competition successful acquisition and mergers require proper understanding of operations between the target company and the acquiring company. This understanding forms a crucial basis for negotiation between the two parties. Despite being one of the leading technology company in the world having reached a peak net worth of 130 billion dollars in 2000, Yahoo has been taken over by Verizon, a telecommunication company in a deal valued at $US 4.8 billion (ABC News, 2016). This deal is by far one of the worst business deals in tech history ever witnessed. This paper is going to assess the business failure of Yahoo in the takeover and analyze some of the reasons which made Yahoo fall behind other tech firms.
Created back in 1995, Yahoo grew to be one of the biggest internet giants during the early internet age. The internet titan provided online communication services providing search, news and email portal amongst other online services. Throughout the 1990s, the company grew steadily diversifying its products and making crucial high-profile mergers and acquisitions. Most of their acquisitions were, however, controversial as Yahoo often altered terms of service such as intellectual property rights something which made them quite ostracized with the existing users of the acquired companies. Yahoo, regarding share price, experienced massive growth throughout the dot-com bubble closing at a record high of $118.75 in the year 2000 before dipping again in the burst of the dot-com bubble to an unprecedented low of $ 8.11 in 2001 (Holland, 2012).
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Before 2000, in 1998, Google offered buy-out stocks to Yahoo at $ 1 million, but the tech company declined the offer. In 2002, Yahoo on realizing Google’s potential offered the search engine $ 3 billion but was given a counter offer of $5 billion which they declined. In 2006, Yahoo offered $ 1 billion to buy out Facebook, but the offer was declined, and they never renegotiated or improved their offer to acquire the company (ABC News, 2016). In 2008, Microsoft offered Yahoo $60 billion, but the offer was rejected by the internet giant citing that Microsoft had undervalued it. Today, while Yahoo is being acquired at approximately $ 5 billion by Verizon a colossal US telecommunication company, Google is worth approximately $498 billion while Facebook is worth approximately $ 350 billion.
The big acquisition misses by Yahoo coupled with diversification challenges are some of the reasons to blame for the poor business deal which occurred between Yahoo and Verizon. Yahoo failed to diversify properly and ensure that it had adapted to the developing technology in the internet evolution and acquire strategic companies; Google and Facebook when it had the chance something which saw its value plummet from a high of $190 billion in 2000 to $ 5 billion in 2016. Yahoo has also been facing a lot of internal turmoil with poor or little conflict management capabilities. In 2014 Yahoo failed to merge with AOL Inc, an advertising company, something which would have seen the company reduce its costs by approximately $ 1 billion (Sherman & Townsend, 2016). The company’s CEO Marissa Mayer failed to reinvent the company and even came into a loggerhead with investors on the issue of spinning off the company’s stake in Alibaba an online marketing company.
There are several reasons which led to the deterioration and devaluation of Yahoo. Chief amongst them has missed opportunities in acquisitions, poor diversification strategies and failure to adjust well to the internet technological changes. From being an internet titan on the onset of internet age to a takeover of $ 5 billion, this deal is by far the worst and saddest business deal in the tech world today.
References
ABC News (2016). Verizon's Yahoo takeover: What just happened? Retrieved from
http://www.abc.net.au/news/2016-07-26/yahoo-sale-to-verizon-what-happened-and-why-it-matters/7660090
Holland, S (2012). Yahoo: An 18-year timeline of events. Retrieved from http://performancein.com/news/2012/07/17/yahoo-18-year-timeline-events/
Sherman, A & Townsend, M. ( 2016). Verizon to End Yahoo Survival Fight With $4.8 Billion Deal . Retrieved from http://www.bloomberg.com/news/articles/2016-07-24/verizon-said-to-announce-4-8-billion-deal-to-buy-yahoo-tomorrow
