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Yahoo: More Bankers Than Options

Silicon Alley Insider notes today that despite its recently announced layoffs, Yahoo is actually hiring. Well, they're hiring investment bankers anyway.
Not sure why the folks from Goldman Sachs and Lehman Brothers can't get the job done, but Yahoo has now added a third investment banker, Moelis & Company, to its advisory team.

So that's three sets of investment bankers for one deal. Seems like a lot. At his point, Yahoo really only has two options: (1) take the Microsoft deal; or (2) figure out a deal with Google to outsource search. If I'm a Yahoo shareholder, I'm voting for option #1. Option #2, while perhaps allowing Yahoo to stay independent, is a short term fix that both exacerbates their current long term problems (brand issues, display monetization, etc.) and creates new ones (integration, morale (what happens to the thousands of Yahoo search engineers?), ad system conflict, etc.).

But it just struck me strange that a company in play would have more bankers than it has options. Obviously bankers are there for one reason and one reason only: collect their exorbitant fees proactive protection against future law suits. The bankers first job in this situation: work the phones, see if they can scare up another buyer or otherwise scare up other strategic alternatives. If that process involves third parties, they then orchestrate the ensuing bake off.

If no outsiders bite though, they move forward by doing their due diligence and issuing a fairness opinion(s) to the Yahoo board. This opinion will state, more or less, that the deal is a fair one and the Board was reasonable in accepting it. That way when Yahoo shareholder sue (and believe me they will - there are strike suit lawyers probably sleeping in tents at the courthouse waiting to file), the board has a third party opinion to point to to satisfy the business judgment/ fiduciary duty rules.

So, why three bankers? Three reasons: conflict, conflict and conflict. Need someone to keep an eye on those keeping an eye on things. So what's this amount to? Yahoo: a company with more bankers than options - and that's not a good place to be.


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Comments (1)

That was a really funny post, Mike. :-)

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