While a merger of AOL and Yahoo is a fervent dream of bankers looking for fees, the reality is a little more–shall we say–premature.
In fact, it’s likely it was just those dealmakers, looking to gin up some activity, who are behind the latest spin-riffic article in The Wall Street Journal that reports on machinations by AOL to hire unnamed advisers to carry out all kinds of complex deals.
Actually, it is the complexity of any of those deals that has put a lot of the takeover, buyout, merger and other scenarios that center around Yahoo–with a side of AOL, as well as News Corp., Microsoft, Yahoo! Japan, the Alibaba Group–on ice.
Among the issues being grappled with: Onerous tax implications around a variety of deals; a need for complete cooperation from too many players; and the realization that a hookup of AOL and Yahoo might cause more problems than it solves.
“It looks great conceptually and everyone gets all hot and bothered,” said one prominent investor who did his own strategizing about Yahoo and AOL. “But when you actually do the numbers, you hit a pretty big wall of impossible.”
Still, any whiff of a deal makes for a spate of overreaching stories in the press, such as the Journal’s, which sources at both Yahoo and AOL tell me started out as one about how the pair were in preliminary merger discussions.
They are not, unless a call or two between AOL CEO Tim Armstrong and Yahoo CEO Carol Bartz on how to handle the hubbub constitutes preliminary.
It doesn’t, of course, unlike serious merger discussions the pair held several years ago, well before the arrival of either Armstrong or Bartz on the scene.
The Journal story then apparently morphed into one about how AOL was on the hunt to figure out what to do–especially about Yahoo–by hiring new advisers.
Actually, the company has its same old one, Allen & Co., since it was spun off from Time Warner last year. It also has since retained Bank of America.
Yahoo’s longtime banking adviser has been Goldman Sachs, which was reengaged more than six weeks ago, only due to all the incoming attention.
That would be from other bankers, private equity firms and others, many of whom have ginned up a variety of schemes and have then pinged both AOL and Yahoo.
Curiously, this kind of activity was reported extensively a month ago here and in the Journal too.
Read the Journal article on October 13:
“AOL Inc. and several private-equity firms are exploring making an offer to buy Yahoo Inc., according to people familiar with the matter, devising a bold plan to marry two big Internet brands facing steep challenges.”
A bold plan to marry? You might want put the honeymoon reservations on hold for now.
That’s because interest does not mean result, especially when it comes to merger scenarios (and, if you are bored, you can read a whole bunch BoomTown came up with in late September).
But, in fact, because the big Yahoo-AOL deal is harder to realize in practice than in theory, things have quieted down and there are no proposals being evaluated by Yahoo or offered by AOL.
And, thus, the dealmakers must begin to chatter again to get things hopping.
Ironically, both boards of AOL and Yahoo should be considering a spate of ideas–however outlandish–to spur growth and innovation to their lackluster businesses.
And, in truth, if some very big players, such as Microsoft, got involved, the smoke around both AOL and Yahoo could someday become a real fire.
(Full disclosure: News Corp. owns Dow Jones, which owns both this site and the Journal.)
