Business Case Studies, Mergers, Acquisitions and Takeovers Case Study, Microsoft’s Bid for Yahoo! Inc,Corporate Valuation Dilemma

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Mergers, Acquisitions and Takeovers Case Study

Case Title:

Microsoft’s Bid for Yahoo! Inc : Corporate Valuation Dilemma

Publication Year : 2008

Authors: Maulik Bhatt, Amy Sonpal

Industry: Internet and e-commerce


Case Code: MAA0159A

Teaching Note: Available

Structured Assignment: Available

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Yahoo! one of the leading internet portals, provided online services like news, information, and entertainment content. It also offered email, instant messaging and personalised web pages to its registered members. Yahoo was experiencing low growth in revenues for quite a number of years in a row. In February 2008, Microsoft, the world’s largest software company offered to buy Yahoo! Inc. for $44.6 billion, or $31 per share in a cash and stock offer. But Yahoo rejected the offer terming it as inadequate. Microsoft later raised the bid to $33 per share, but Yahoo! rejected this raised bid also. Subsequently, Microsoft withdrew its bid. The case facilitates discussion on the fair value of a share of Yahoo! The case also attempts to employ various methods of financial valuation of a firm. Apart from this, the case also points out the difference between the value of a firm as ‘a going concern’ and as ‘a target for acquisition’.

Pedagogical Objectives:

  • To understand the concept of Business Valuation
  • To understand the difference between value of a firm as an independent business, and as a target of acquisition.

Keywords : Microsoft Corp.; Yahoo!; Steve Ballmer; Jerry Yang; Mergers,Acquisitions,Alliances Case Study; Valuation; Google; Online Services; Merger; Acquisition; AOL; Internet Advertisement; Free Cash Flow to Firm; FCFF

Contents : 
Online Services Industry
Top 50 Most Popular Websites of US
Yahoo! Inc.’s Struggles
Yahoo! Products and Services
Microsoft Inc.’s Bid for Yahoo!
Microsoft Product Segments
Motivation for acquiring Yahoo!
Microsoft’s bid for Yahoo! and Rejection of the Bid
Valuation Data for Yahoo!

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