Yahoo History Suggests Resistance to an AOL Takeover

Yahoo may be the target of a takeover bid, according to rumors. However, Yahoo's corporate culture and its rejection of Microsoft suggest it would fight hard.

Could Yahoo find itself an acquisition target?

That seems to be the question drifting around the Web, following news that a handful of private equity firms were exploring the prospect of teaming with AOL or News Corp. for a Yahoo takeover. Yahoo's stock price leapt upward, and Bank of America Merrill Lynch analyst Justin Post told Reuters that private-equity focus on Yahoo "makes sense."

The Wall Street Journal also reported that AOL had discussed the prospect of a Yahoo bid with private equity firms Blackstone Group and Silver Lake Partners. "The deal would reportedly include Yahoo selling off its 40 percent stake in Chinese Internet search giant Alibaba Group, parent company of Hong Kong-listed Ltd," the newspaper reported Oct. 14.

But Yahoo has had the ability to resist aggressive takeovers before-most notably in the case of Microsoft, which pushed to acquire Yahoo in 2008. That resulted in Yahoo publicly refusing an enormous offer of $47 billion rather than become a Redmond subsidiary.

That raised the specter of vicious proxy fight, with Microsoft attempting to seize sympathetic seats on Yahoo's board. But that effort petered out, too, angering Yahoo shareholders who had smelled the prospect of a major payday with Microsoft buying stock at a premium. Their anger, in turn, drove Yahoo co-founder Jerry Yang from the CEO slot.

In a November 2008 letter to Yahoo employees, Yang tried to put a positive spin on developments. "The fact remains that Yahoo is now a significantly different company that is stronger in many ways than it was just 18 months ago," he wrote. "This only makes it all the more essential that we manage this opportunity to leverage the progress up to this point as effectively as possible."

Yang's successor, Carol Bartz, seemed much more open to selling off Yahoo's assets. In a May 2009 interview at the seventh annual D: All Things Digital conference, she told technology columnist Kara Swisher that Yahoo would sell its search business to Microsoft "if there [are] boatloads of money and the right technology involved."

When asked whether she would sell Yahoo in its entirety to Microsoft, Bartz replied: "They'd have to have biiiig boatloads of money," according to a transcript.

But later that summer, Microsoft and Yahoo ended up entering a 10-year search and advertising agreement in which Bing would take over Yahoo's back-end search, while Yahoo assumed worldwide sales duties for both companies' search advertisers. Microsoft also paid Yahoo about $150 million in expenses.

Ever since, Bartz has maintained an aggressive program of cutting and streamlining the company. "We're really revising everything," she said during a September 2009 presentation at the Nasdaq MarketSite in Times Square. "Where it makes sense, we will sell, and where it makes sense, we will shut down."

In other words, if private equity really does want to make a play for Yahoo, the company's history and corporate culture might transform any takeover battle into a real fight-one that Yahoo, even with its diminished profile, has solid odds of winning.