Yahoo! and Facebook?  Deal or No Deal?

The Economist newspaper points out that ever since Yahoo! rejected Microsoft’s offer to buy it for $31 a share in February, its fortunes have sharply worsened. Growth in internet advertising, Yahoo!’s main source of revenue, is slowing as the economy sours. An alliance with its main rival, Google, has been put on hold while regulators study the deal. Its share price has lately fallen below $13.

Things are worst for Yahoo in Japan, which I have learnt is their key market. It runs an online-auction site there that’s much bigger than eBay and has suffered a huge security breach which has been terrible news. Users may be less inclined to use a site they no longer trust to protect their personal details.

What about Facebook? It seems a lifetime ago that Microsoft offered to buy a 1.6% stake in Facebook that valued the whole company at $15 billion. The famous founder, Mark Zuckerberg has turned down numerous multi billion dollar offers for his company – offers that now look extraordinarily generous.

Much has changed since the heyday of ‘Merger Mania’. The mergers and takeovers we are seeing now often have much more to do with survival than the empire building megabucks deals of the recent past. For firms operating today, taking the money looks much more attractive than a year ago.