Thursday, January 10, 2008

Rumor: Yahoo and Microsoft After eBay

Scot Wingo just posted an interesting little rumor that Yahoo and Microsoft are bidding to acquire eBay so I thought I would have some fun and look at how this might possibly go down.

[Update: the combination of Microsoft and Yahoo together going after eBay is not what Scot is saying, it is strictly my take, since we are all speculating]

For entertainment purposes only:

This news seems curious because it sounds more like a baseball trade than a company acquisition. Yahoo can't really acquire eBay on their own so they appear to be enlisting the help of Microsoft in the deal (a 3-team trade). I think it is plausible that the two companies could make this deal work and that Microsoft might take an equity stake in Yahoo as well.

But I'm still trying to figure out what Microsoft gets out of the deal. I am already on record as saying I see a nice fit between eBay and Yahoo. It is possible that Microsoft would turn over MSN to Yahoo and get Skype and PayPal out of the deal. eBay marketplaces would go to Yahoo in the transaction.

This sounds too convoluted to actually happen but it is fun to speculate.

Update #2: I was curious how M&A activity (like this Yahoo, Microsoft, eBay rumor) reacts surrounding a recession and found this interesting article in the Wall Street Journal. It does make a case that M&A activity declines during and following a recession (which makes sense) but if you look at the chart it does increase prior to a recession. Is the timing right for a deal? Only your Investment Banker knows for sure.

Just my 5 cents!

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