Acquisition of Yahoo by Verizon

Discuss about the major impact of acquisition on Verizon and Yahoo.Do you think it 's a right decision taken by Yahoo. What was the Valuation approach in this case.

Verizon Communications Inc. agreed to buy Yahoo! Inc.’s web assets for $4.83 billion, ending the company’s two-decade run as an independent business that took it from Stanford University startup at the dawn of the internet age to also-ran behind nimbler online rivals such as Google and Facebook Inc.

Verizon will pay cash in a deal that includes Yahoo real estate, but excludes some intellectual property, which will be sold separately. Yahoo will be left with its stakes in Alibaba Group Holding Ltd. and Yahoo Japan Corp., with a combined market value of about $40 billion.

The impact of acquisition on Version and Yahoo are-
1. Verizon is buying Yahoo to strengthen its media and advertising platform, so the websites are a valuable part of that.
2. “Yahoo’s content and advertising portfolio should vastly expand AOL’s reach and technology,” Jefferies analyst Mike McCormack said in a note to investors. Yahoo reaches over 1 billion active users each month, including 600 million mobile users, and McCormack said that scale is attractive when selling ad space.
3. Outsell analyst Giusto points out that Yahoo has already been closing its less popular digital magazines. For instance, Yahoo shuttered Yahoo Health, Yahoo Real Estate and five others in February. The ones that are left, including Yahoo Finance and Yahoo Sports, are more popular, so they may stick around.
4. Yahoo’s Tumblr blogging site is another matter. The company took a big accounting write-down last week to reflect the declining value of Tumblr. As the nature of blogging itself changes, Tumblr faces competition from sites like Medium, which is increasing in popularity as a destination for longer-form writings.

The valuation approach-
Yahoo is having 440 million quarter loss that's why they take Asset base pricing for this acquisition case.

By jagrit Bhargava (P15075)

Verizon Communications Inc. has agreed to pay $4.8 billion to acquire Yahoo Inc. The price tag, which includes Yahoo’s core internet business and some real estate, is a remarkable fall for the Silicon Valley web pioneer that once had a market capitalization of more than $125 billion at the height of the dot-com boom.
For New York-based Verizon, the deal simply adds another piece to the digital media and advertising business it is trying to build. When the bidding began in April, Verizon was the immediate front-runner with a market capitalization of roughly $228 billion and a plan for how to plug Yahoo into its upstart digital media business, which includes AOL properties it acquired last year for $4.4 billion.
Verizon is building a portfolio of online content and aiming to monetize it via advertising. Its current assets include Huffington Post and TechCrunch, which it acquired in last year’s AOL deal, and its own mobile video app, called go90. Acquiring. Yahoo will bring in millions more viewers from Yahoo sites like Finance, Sports and
News. The takeover will double the size of Verizon’s digital advertising, placing it as a distant third behind Google and Facebook in the $187 billion market. After acquiring AOL for $4.4 billion last year, the deal is part of Verizon's goal to have a global audience of two billion users and $20 billion in revenue by 2020. But grabbing traffic and ad dollars from established competitors like Facebook and Google will be tough, said Craig Key, svp of media at Space150.
From a pricing perspective, I don't think this will do much to impact the marketplace. As big as Yahoo, AOL and Verizon are, their combined traffic would make up just 7 % of the top 50 properties' traffic. The internet is just too big for an old-school monopoly-style squeeze play to drive up prices."

The valuation approach- Asset base pricing

Verizon said that the new Yahoo properties will become part of Verizon’s AOL business, which the phone company bought last year for $4.4 billion. It’s quite possible that Verizon will retain the Yahoo brand – as a sub-brand like AOL. In the U.S., Yahoo is the second most-popular email service behind Google’s Gmail. It’s even more popular in Europe and Latin America. Because of that, it makes sense for Verizon to keep that brand affinity intact, eMarketer analyst Paul Verna said.

Impact of acquisition on verizon and yahoo:-
1. Verizon is buying Yahoo to strengthen its media and advertising platform, so the websites are a valuable part of that.
2. “Yahoo’s content and advertising portfolio should vastly expand AOL’s reach and technology,” Yahoo reaches over 1 billion active users each month, including 600 million mobile users, and McCormack said that scale is attractive when selling ad space.
3. Yahoo’s Tumblr blogging site is another matter. The company took a big accounting write-down last week to reflect the declining value of Tumblr.
4. As the nature of blogging itself changes, Tumblr faces competition from sites like Medium, which is increasing in popularity as a destination for longer-form writings.

Verizon's acquisition of Yahoo could give the company an edge to stay in the lead. The main story is really about what Verizon had to do to build a competitive franchise. It had to maintain its lead over the competition by offering subscribers more than just a great wireless network.
1. The first was with the NFL, which Yahoo already has a relationship with. The NFL plans to offer international rights to the league for games to be played in London and China.
2. Yahoo has 1 billion active users per month, with 600 million visitors on mobile. That works out to $5 per lead. They'd take that in a heartbeat.
3. Joining Forces:- Verizon acquired AOL last year for 4 billion dollars. Picking up Yahoo to join forces with AOL is a savvy play in the race to second place supremacy in the search engine game.
4. Premium Content:- With this acquisition, Verizon can roll out their Go90 app to Yahoo customers. Premium content is the next battle in the war for network providers, and this deal keeps Verizon on the attack.
5. Growing the List:- Marketing these days comes down to one thing: growing your list.
6. Yahoo's advertising platform is an excellent addition to Verizon's strategy of serving relevant, location-based ads to its mobile devices.

Thus, according to me Verizon has taken a smart move by accquiring Yahoo.

Verizon has been the leading candidate in Yahoo’s sales process, which received its first round of bids in mid-April.

The telecommunications company and its AOL unit were attracted by those 1 billion monthly users, said AOL CEO Tim Armstrong, who will oversee the integration under the purview of Marni Walden, Verizon’s executive VP and president of the product innovation and new businesses.

“The scale game has really changed, and my guess is in the next five years it’s going to even more dramatically change,” Armstrong told USA TODAY on Monday. “So putting these companies together gives us a very significant leg up in terms of competing for the future.”

Not included in the deal: Yahoo’s 15% stake in Chinese retailing giant Alibaba, worth $32 billion, and its 36% stake in Yahoo Japan, worth about $8 billion. When the transaction closes — which is expected in the first quarter of 2017 — Yahoo will change its name and become a publicly traded investment company, the company said.

CEO Marissa Mayer will help with the transition and could stay on long term, Armstrong said.

Verizon will lean on Yahoo's user base to grow the audience for its mobile and online video properties including its ad-supported go90 network, launched in October 2015, which streams millennial-focused TV, sports and other content to smartphones and mobile devices.

Shares of Verizon (VZ) were down Monday 0.4% to $55.87. Yahoo shares (YHOO) were down 2.7% to $38.32.

A former Google exec, Mayer four years ago came to Yahoo — one of the original Web portals and Internet search destinations — to captain a turnaround.

Despite Yahoo growing its mobile advertising business under Mayer's tenure, the company is expected to earn a dwindling share of a growing global digital ad market, according to research firm eMarketer.

Yahoo's share of the $187 billion market is predicted to drop from 1.5% in 2015 to 1.3% this year, eMarketer projects.

Frustrated by stalling growth and a sliding stock price, activist investors pressured Mayer and the board to cut costs and sell off core assets — a campaign that resulted in Monday’s deal.

As with many acquisitions and mergers, products, services, and business units that do not represent present or potential business are shut down.

Yahoo is no longer an independent entity. Verizon purchased Yahoo for $4.8 billion which has made Verizon larger than was it was before. This broadband and cell phone company has quickly grown to become a major entity in the world of online marketing. With the range of web properties and brands acquired by Verizon through this deal, advertisers are going to have more opportunities to advertise than ever before.

Yahoo comes with an enormous amount of content. And this is content people are still reading on a regular basis. With more and more people reading from a mobile device, an unprecedented opportunity presents itself for marketers to hit mobile browsers.
The content footprint of Verizon will be much bigger, as a result.

Now, Verizon fully intends on keeping its newly acquired Yahoo-associated brand alive, so there will be just as many advertising opportunities as before. Verizon hasn’t made any announcements on the future of Flurry, but if it intends on appealing to advertisers, it will either keep or re-brand it.


.............Akshat Jhalani
.............P15061

Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL. The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo,” Marissa Mayer said in the release. “This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social. Yahoo and AOL popularized the Internet, email, search and real-time media. It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile. We have a terrific, loyal, experienced and quality team, and I couldn’t be prouder of our achievements to date, including building our new lines of business to $1.6 billion in GAAP revenue in 2015. I’m excited to extend our momentum through this transaction.”

Last year, Verizon acquired AOL for $4.4 billion to boost its media and advertising businesses. Verizon remains a giant telecom company, but the acquisitions of AOL and now Yahoo show that the company wants to diversify its revenue and operations.

Once the deal closes, Verizon wants to merge Yahoo and AOL to form a bigger advertising and media subsidiary. This way, AOL gets more scale and reaches enough internet and mobile users to become an advertising giant reaching hundreds of millions or even billions of people.

Verizon Communications announced plans to acquire Yahoo for $4.8 billion in cash, ending months of uncertainty after Marissa Mayer's battered internet giant company said it would review strategic alternatives.

Share prices of both companies initially moved slightly higher in premarket trading after the announcement, but they turned lower. By early afternoon, Yahoo was down 2.7 percent. (For the latest prices, click here for Yahoo and here for Verizon.)
The acquisition will help the telecom company in its efforts to build a media company.
The transaction is seen boosting Verizon's AOL internet business, which the company acquired last year for $4.4 billion, by giving it access to Yahoo's advertising technology tools, as well as other assets such as search, mail, messenger and real estate.

Verizon Yahoo

After months of speculation and intrigue, the bidding war for Yahoo came to an end today with the announcement that Verizon has agreed to acquire the former search giant’s digital assets for $4.83 billion in cash. Under the terms of the deal, Yahoo's remaining assets, including its non-core patents and stakes in Alibaba and Yahoo Japan, will become part of a publicly traded investment company and rebranded under a new name.

Rumors of the impending news boosted Verizon shares by 1.3% and Yahoo shares by 1.4% on Friday, a modest Wall Street reception. The deal is expected to close in late 2016 or early 2017.
For Verizon, the deal paves the way to assembling a new media empire capable of delivering potentially billions in advertising revenue and offsetting slowing growth in its wireless and wireline business units. Verizon acquired AOL for its media and advertising business in 2015, to the tune of $4.4 billion, as a first major step toward that goal—and in the months since then has signed deals with startup video platforms including AwesomenessTV and Complex Media. It also launched its own mobile video app, Go90, last year, through which it offers sports and short-form originals designed for the YouTube generation. With assets like Yahoo Mail and Yahoo Finance, Verizon gains 600 million monthly mobile users—essential for any growing media company these days—and a shortcut to playing alongside Facebook, Google, and Twitter in the digital advertising big leagues.

WHY VERIZON BOUGHT YAHOO
"If I look at the AOL business, the adtech capabilities are best in class. But they simply don’t have enough scale" in terms of audience, Verizon executive vice president Marni Walden, who leads product innovation and new business, tells Fast Company. She has been tasked by CEO Lowell McAdam with turning Verizon's media efforts into a $5 billion-plus business. Building audience organically, she says, takes too long when competing with giants like Facebook, which benefits from a strong global presence. "We knew when we bought AOL that that wasn’t the end of the story, there was more that we would want to do," Walden says. "We’re building something that we want to turn into a very large business. Getting audience and getting scale is critical."

The year's biggest sale that never was has been consummated. Verizon Communications (ticker: VZ), the largest wireless service provider in the U.S., has outbid four other bidders – including rival AT&T (T) – and is set to absorb Yahoo's core internet business and intellectual property for $4.8 billion.Originally, Verizon had bid between $3.75 billion and $4 billion for the core web search and advertising business, leaving Yahoo's IP on the table. But in a late push, Verizon adjusted its bid to include Yahoo's "non-core" assets to acquire the struggling Sunnyvale, California-based company."This sale is not only an important step in our plan to unlock shareholder value for Yahoo, it is also a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising, and social," Yahoo CEO Marissa Mayer says in a message to Yahoo employees Monday. "As one of the largest wireless and cable companies in the world, Verizon opens the door to extensive distribution opportunities."The Yahoo deal is a power play by Verizon, one intended to take on the two mobile advertising heavyweights of today, Alphabet (GOOG, GOOGL) and Facebook (FB). Those two companies alone take in more than 50 percent of all U.S. digital advertising revenue, according to eMarketer.Yahoo's share is a measly 3.4 percent.There's no way Verizon swoops in and turns Yahoo into an advertising powerhouse to rival Google and Facebook. But it can combine the content and advertising technology it acquired with the $4.4 billion purchase of AOL last year to become a more legitimate third wheel to FB and GOOG. Yahoo is the fifth-most visited website in the U.S., while AOL is the 45th, according to Alexa.com.For VZ shareholders, this might not seem like a very sexy deal. But it's well thought out, and if Verizon can use Yahoo and AOL to become a meaningful player in mobile content, video, and advertising, then $4.8 billion may end up being a small price to pay.

Verizon is interested in buying Yahoo’s ad and content businesses and for the same reason it acquired AOL last year for $4.4 billion. And that is to build the kind of scale that’s necessary to make money from digital advertising on mobile devices, as growth in the traditional telecom business slows.
"This sale is not only an important step in our plan to unlock shareholder value for Yahoo, it is also a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising, and social," Yahoo CEO Marissa Mayer says in a message to Yahoo."
As one of the largest wireless and cable companies in the world, Verizon opens the door to extensive distribution opportunities."
This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social.
Originally, Verizon had bid between $3.75 billion and $4 billion for the core web search and advertising business, leaving Yahoo's IP on the table. But in a late push, Verizon adjusted its bid to include Yahoo's "non-core" assets to acquire the struggling Sunnyvale, California-based company. The valuation for acquisition was based on the Asset Valuation Approach.

Verizon is interested in buying Yahoo’s ad and content businesses for the same reason it acquired AOL last year for $4.4 billion. Verizon believes that a combined AOL/Yahoo would provide the digital advertising platform they need to execute their video reinvention strategy. Even, it will help Verizon compete with Google and Facebook, who are way out in front when it comes to market domination of online advertising.

Verizon bought Yahoo for $4.83 Billion. After the bidding -"If Verizon bid that high, they definitely got it, because they’re the safe bet for Yahoo", said a rival bidder. Coming to the point whether it is good or not ? I think, YES, it is good for Verizon to buy Yahoo as I think that Verizon would definitely have a plan to help in growing the market of itself after the purchase of Yahoo through an add-push.

Verizon is buying Yahoo to strengthen its media and advertising platform, so the websites are a valuable part of that.
“Yahoo’s content and advertising portfolio should vastly expand AOL’s reach and technology,” Jefferies analyst Mike McCormack said in a note to investors. Yahoo reaches over 1 billion active users each month, including 600 million mobile users, and McCormack said that scale is attractive when selling ad space.

The effort is complicated because the sales proceedings between Verizon and Yahoo are at an early stage. Though teams from the two companies were already working together on integration plans, Verizon does not yet own Yahoo. As a result, Verizon does not have direct access to the Silicon Valley company’s servers to conduct its own investigation.

In late July, after the Verizon deal was announced, Yahoo became aware of a claim that about 280 million of its user credentials had been hacked, according to a person briefed on the specifics, who spoke on the condition of anonymity. Yahoo started an investigation but could not substantiate the claim, this person said. It was not clear on Friday whether Yahoo had made Verizon aware that it was looking into this claim in July.

During the course of that investigation, Yahoo learned of the more severe breach, which it has said it believes was state-sponsored. Yahoo has not yet said exactly when it realized how large the intrusion was, leaving open the question of whether Ms. Mayer and her team waited to notify Verizon of the hack. Yahoo is now working with outside security consultants and said its investigation was continuing.

Brian Quinn, an associate professor at Boston College Law School, said Verizon had two main options if it decided to use the hack as leverage in setting the terms of the deal.

“They could say, ‘This thing is huge. We want to walk away from the transaction,’” he said. Were Verizon to try to claim that the breach was so severe it was grounds to terminate the deal, it would have to prove that the hack amounted to a material adverse effect on the value of Yahoo.

The year's biggest sale that never was has been consummated.he largest wireless service provider in the U.S., has outbid four other bidders – including rival AT&T (T) – and is set to absorb Yahoo's core internet business and intellectual property for $4.8 billion.

Originally, Verizon had bid between $3.75 billion and $4 billion for the core web search and advertising business, leaving Yahoo's IP on the table. But in a late push, Verizon adjusted its bid to include Yahoo's "non-core" assets to acquire the struggling Sunnyvale, California-based company.

"This sale is not only an important step in our plan to unlock shareholder value for Yahoo, it is also a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising, and social," Yahoo CEO Marissa Mayer says in a message to Yahoo employees Monday. "As one of the largest wireless and cable companies in the world, Verizon opens the door to extensive distribution opportunities."

The impact of acquisition on Version and Yahoo are-
1. Verizon is buying Yahoo to strengthen its media and advertising platform, so the websites are a valuable part of that.
2. “Yahoo’s content and advertising portfolio should vastly expand AOL’s reach and technology,” Jefferies analyst Mike McCormack said in a note to investors. Yahoo reaches over 1 billion active users each month, including 600 million mobile users, and McCormack said that scale is attractive when selling ad space.
3. Outsell analyst Giusto points out that Yahoo has already been closing its less popular digital magazines. For instance, Yahoo shuttered Yahoo Health, Yahoo Real Estate and five others in February. The ones that are left, including Yahoo Finance and Yahoo Sports, are more popular, so they may stick around.
4. Yahoo’s Tumblr blogging site is another matter. The company took a big accounting write-down last week to reflect the declining value of Tumblr. As the nature of blogging itself changes, Tumblr faces competition from sites like Medium, which is increasing in popularity as a destination for longer-form writings

Yahoo is a company that has changed the world, and will continue to do so through this combination with Verizon and AOL. The sale of our operating business, which effectively separates our Asian asset equity stakes, is an important step in our plan to unlock shareholder value for Yahoo,” Marissa Mayer said in the release. “This transaction also sets up a great opportunity for Yahoo to build further distribution and accelerate our work in mobile, video, native advertising and social. Yahoo and AOL popularized the Internet, email, search and real-time media. It’s poetic to be joining forces with AOL and Verizon as we enter our next chapter focused on achieving scale on mobile. We have a terrific, loyal, experienced and quality team, and I couldn’t be prouder of our achievements to date, including building our new lines of business to $1.6 billion in GAAP revenue in 2015. I’m excited to extend our momentum through this transaction.”

Last year, Verizon acquired AOL for $4.4 billion to boost its media and advertising businesses. Verizon remains a giant telecom company, but the acquisitions of AOL and now Yahoo show that the company wants to diversify its revenue and operations.

Once the deal closes, Verizon wants to merge Yahoo and AOL to form a bigger advertising and media subsidiary. This way, AOL gets more scale and reaches enough internet and mobile users to become an advertising giant reaching hundreds of millions or even billions of people.

Akshay Sharma

Posts : 2
Join date : 2016-10-01

View user profile Send private message

First, this acquisition has the opportunity to make Verizon distinctive.

Think about all those ads you see for mobile phone service. Pretty much alike. All of them trying to say that their service is better than competitors, in a world where customers don’t see much difference. 3G, 4G – pretty soon it feels like they’ll be talking about 10G – but users mostly don’t care. The service is usually good enough, and all competitors seem the same.

So, that leads to the second element they advertise – price. How many different price programs can anyone invent? And how many phone or tablet give-aways? What is clear is that competition is about price. And that means the product has become generic. And when products are generic, and price is the no. 1 discussion, it leads to low margins and lousy investor returns.

But a Yahoo acquisition could make Verizon differentiated. Verizon could offer its own unique programming, at a meaningful level, and make it available only on their network. And this could offer price advantages. Like with Go90 streaming, Verizon customers could have free downloads of Verizon content, while having to pay data fees for downloads from other sites like YouTube, Facebook, Vine, Instagram, Amazon Prime, etc. The Verizon customer could have a unique experience, and this could allow Verizon to move away from generic selling and potentially capture higher margins as a differentiated competitor.

AOLHooSecond, Yahoo will never be a lead competitor and has more value as a supporting player.

Recommended by Forbes
TRENDING ON LINKEDIN British Billionaire Richard Branson Endorses Clinton, Saying 'Trump Presidency...
MOST POPULAR The 20 Most Prestigious Internships For 2017
CargillVoice: Great Brands Are Built From Within

Yahoo has lost its lead in every major competitive market, and it will never catch up. Google is no. 1 in search, and always will be. Google is no. 1 in video, with Facebook no. 2, and Yahoo will never catch either. Ad sales are now dominated by adwords and social media ads – and Yahoo is increasingly an afterthought. Yahoo’s relevance in digital advertising is at risk, and as a weak competitor it could easily disappear as buyers focus on Facebook, Instagram, WhatsApp, Twitter, Vine, etc.

But, Verizon doesn’t need the no. 1 player to put together a bundled solution where the no. 2 is a big improvement over nothing. By integrating Yahoo services and capabilities into its unique platform, Verizon could take something that will never be no. 1 and make it important as part of a new bundle to users and advertisers. As supporting technology and products Yahoo is worth quite a bit more to Verizon than it will ever be as an independent competitor to investors – who likely cannot keep up the investment rates necessary to keep Yahoo alive.

Third, Yahoo is incredibly cheap.

For about a year Yahoo investors have put no value on the independent Yahoo. The company’s value has been completely its stake in Alibaba. So investors inherently have been saying they would take nothing for the traditional “core” Yahoo assets.

Additionally, Yahoo investors are stuck trying to capture the Alibaba value currently locked-up in Yahoo. If they try to spin out or sell the stake then a $10-12 billion tax bill likely kicks in. By getting rid of Yahoo’s outdated business what’s left is “YaBaba” as a tracking stock on the NASDAQ for the Chinese Alibaba shares. Or, possibly Alibaba buys the remaining “YaBaba” shares, putting cash into the shareholder pockets — or giving them Alibaba shares. Either way, the tax bill is avoided and the Alibaba value is unlocked. And that is worth considerably more than Yahoo’s “core” business.

It is highly unlikely a deal is made for free. The egos are too big, and too many investment bankers are around to let that happen. But lacking another likely buyer Verizon is in a good position to purchase these assets for a pretty low price. And that gives them the opportunity to turn those assets into something worth quite a lot more without the overhang of huge goodwill charges left over from buying an overpriced asset – as usually happens in tech.

Fourth, Yahoo finally gets rid of an ineffectual board and leadership team.

The company’s board has been trying to find a successful leader since the day it hired Carol Bartz. A string of CEOs have been unable to define a competitive positioning that works for Yahoo, leading to the current lack of investor enthusiasm.

Current CEO Mayer and her team, after months of accomplishing nothing to improve Yahoo’s competitiveness and growth prospects, is now out of ideas. Management consulting firm McKinsey & Company has been brought in to engineer yet another turnaround effort. Last week investors learned there will be more layoffs and business closings as Yahoo again cannot find any growth prospects. This was the turnaround that didn’t, and now additional value destruction is brought on by weak leadership.

Most of the time when leaders fail the company fails. Yahoo is interesting because there is a way to capture value from what is currently a failing situation. Due to dramatic value declines over the last few years, most long-term investors have thrown in the towel. Now the remaining owners are very short-term, oriented on capturing the most they can from the Alibaba holdings. They are happy to be rid of what the company once was. Additionally, there is a possible buyer who is uniquely positioned to actually take those second-tier assets and create value out of them, and has the resources to make it happen. A real “win/win” is now possible.



CHETAN PRAKASH.