Does Anyone Understand The MS-Y! Saga Anymore?

I've been following this continuing saga since it began in February, but even I'm a little confused as to where this will ultimately go. In today's news it appears that Microsoft is, once again, expressing an interest in acquiring Yahoo!'s search business. It's no longer interested in bidding for the whole company and is in talks with others about acquiring the non-search parts of their business. Personally, this just comes across as indecisiveness on the part of Steve Ballmer and Microsoft, doesn't it?

When Microsoft walked away from the table last month, it seemed as though it was a classic M&A move - letting Yahoo! swing in the wind. It worked too, with Carl Icahn and other shareholders storming the doors at Yahoo! and challenging Yang and the rest of the Board on their decision not to sell. As you know, Yahoo! has been back-peddling ever since to appease those same shareholders, but Microsoft seemed adamant that it was no longer interested in an outright acquisition, but may be interested in a cooperative search-based relationship.

The next chapter, of course, brought Google into the story-line with Yahoo! announcing that they would work with Google on Search. That, honestly, seemed to be the final nail in the proverbial coffin since the deal with Google involved substantial penalties should Yahoo! walk away from the deal thereafter. Today's talk of Microsoft's renewed interest is just weird; what is it that they want? They have the cash to buy them; if they want them, why not just buy them?

Mergers & Acquisitions Are Up! Really!

The media is quoting a decline in mergers & acquisitions of about 35% in the past year, but the numbers can be deceiving. The total value of the deals is down, but the number of deals is actually up - up by 11% in fact. Does this represent a sign of life in the markets?

What makes this even more interesting is the size of the premiums - they're not only higher than the same period a year ago, but they're at the highest levels in nearly 6-years. With premiums of as much as 25% above the market price four-weeks prior to the deal. The question is, what does this information mean? In 1999, the number of deals, and deal premiums, were at all-time highs as well and we all know what followed.

Yahoo to MS: Buy us or we'll go with Google

That's right, it seems as though Mr. Carl Icahn's pressure-play on Yang-and-Board has worked; Yahoo! now seems to be willing to hear all offers. Moreover, it appears as though that Yahoo! will make one deal or another and, funny enough, the pressure now seems to be on Microsoft to close the deal or risk losing-out on any possible relationship with its target.

Microsoft's initial bid at $31 was quickly sweetened to $33 per share before being withdrawn in spectacular fashion a few weeks ago. The media, including lowly bloggers such as yours truly, have been talking about it (and scratching their heads) ever since. The deal seemed to be a smart move for everyone involved and the price seemed to be good enough to have all the major shareholders nodding up-and-down like mad. Much of the reason for the failure of the deal the first time around has been credited to the egos of the co-founders at Yahoo including Jerry Yang, it's current CEO. With pressure building from the likes of Carl Icahn, the activist investor, have shed such a big spot light on the deal that it seems as though Yahoo!'s Board has been left with no other option that look for any deal that will get them off their backs.

Microsoft re-approached Yahoo! shortly after the failure of the buyout offer with a complex partnership proposal that would see them working together on advertising - this came quickly after news surfaced that Google was working with Yahoo! on a very similar deal. It now seems that Yahoo! prefers the partnership proposal offered by Google, but would ultimately seek a satisfactory buyout offer from Microsoft. At the end of the day, Microsoft may get what it always wanted in the form of an acquisition, but it seems to be that if their next attempt doesn't work, they won't have another bite at the apple.

Google Isn't Done with Yahoo! Just Yet.

As much as Microsoft would like this saga to end, I don't think that there's anyone who believes that we're anywhere near the last chapter in this story. While Microsoft has re initiated discussions with Yahoo! in hopes of forming some kind of partnership after the failure of its initial buyout bid, Google is holding strong on its own deal with Yahoo!. With as much as $1 billion on the table for Yahoo!, it may be difficult to exclude Google's proposed advertising collaboration from the picture.

Not surprisingly, of course, antitrust concerns have surfaced with talk of the possibility that the two largest online advertising giants could unite, but Google is adamant that it can work out a model that would not threaten the competitive landscape. To their credit, there is a fair bit of precedent on which to lean on. Canon, for example, supplies 80% of the laser printer market ...including its #1 competitor Hewlett-Packard or Toyota selling its hybrid technology to its competition. Similarly, Google foresees a partnership that would leave Yahoo! independent, but allow it to leverage its superior advertising technology and broader advertiser base to help its bottom line.

With Yahoo!'s board announcing that it has postponed its annual meeting once again, there's no doubt that Jerry Yang, its CEO, have a lot to consider. The likes of Carl Icahn and Boone Pickens, with 10 million shares each and calling for a new board, aren't making things any easier for them either. From an outsider's (and investor's) perspective, however, it's hard to see how Yahoo! will not win in the end regardless of the outcome. Is this not the time to buy?

BCE Buyout Dead; Is Telus its Only Hope?

The biggest proposed buyout is dead after a ruling by the Canadian courts. Bond holders in Bell Canada Enterprises (BCE) appear to have won against the syndicate of private equity firms that were looking to buy the monolith for a total of $51.8 billion dollars - making it the largest LBO ever - at least it would have been. With the 5% decline in it's stock price following the request of financing banks to renegotiate the terms of the loans, the market appeared to have seen what lay ahead, but now what?

The fact that BCE is in dire straights has not changed. Almost as soon as the PE deal collapsed, talk of Telus, the largest telecommunications provider in Western Canada, may step-in to save the day. Telus had considered BCE about a year-back, but walked away when it wasn't granted access to internal financial records. Even if it does choose to give this deal a second look, there's no doubt that there would be competition concerns with the entire Canadian market being essentially divided between only these two firms and Rogers Communications.

Bell has said that it will appeal the decision to the nation's Supreme Court, but there's no way of knowing whether the court will even hear the case - the decision, at least according to the appeals court - is consistent with previous decisions. Bond holders, for the time being, appear to have won their case and have kept the company from assuming even greater debt and increasing its financial risk, but will their interests be ultimately served if the company can't meet those existing obligations?

Pickens follows Icahn into Yahoo!; What does it mean?

I happened to be watching CNBC when it happened: Boone Pickens, the many best known for his winning bets in oil and gas (and more recently wind power) has follows Mr. Carl Icahn into Yahoo! with a similarly 10 million-share bet (about $275 million). Of course, with investors on the sidelines waiting to see what happens next, many have read into Mr. Pickens purchase in the hopes of gaining an insight into what insiders might know.

When asked, during his interview, how he felt about the Microsoft-Yahoo! saga, unfortunately, Mr. Pickens revealed that his only reason for investing was Mr. Icahn's interest in it and "that's enough" for him. So, should that be enough for the rest of us as well?

Carl Icahn does have approximately 50 million options on Yahoo! in addition to his shares so there's no question about his commitment to this deal and his expectations of how it will ultimately conclude. Are we indecisive investors waiting for some additional confirmation going to regret not following Mr. Pickens' trust in Mr. Icahn's ability to get the deal done?

Never a Bad Time to Invest

When the stock market is hot, everyone seems to be making money. When it's down, on the other hand, it seems everyone is telling you that now is the time to invest so as to make a bundle as soon as things pick-up again. Is it ever a bad time to invest?

According to buyout firms, the answer appears to be no. Moreover, history seems to back-up their claims showing that returns on these private equity funds return far superior rates beginning from the year of the bubble and over the following two-years. Remember the popping bubble in 2000? Well, would you be surprised to hear that 2001 through 2002 resulted in returns of 33%, 29% and 31% in each year respectively?

I read a great little two-liner about how private equity firms view the market - regardless of its position in the business cycle. If a company is worth more in private hands than it is in public hands, then there's money to be made in performing a buyout. If the reverse is true and a company is worth more as a public entity, then there's money to be made in going-public. No matter what, you see, there's always money to be made.