Hostile Takeover Reality
May 4, 2008 | Filed Under Deals
So Microsoft walks away from Yahoo.
My take: there’s a reason you rarely see large-scale hostile takeovers in the tech world. The real assets don’t just walk out the door every day, but you need most of their hearts and all of their minds to compete.
Rather like big law firm mergers?
Three other notable perspectives:
– Former O’Melveny & Myers and Wilson Sonsini lawyer (and current Time 100 man) Michael Arrington speculates that Steve Ballmer may be angling for a better deal. (I doubt it).
– Steven Davidoff agrees with Arrington that Microsoft may be back later (and his commenter #2 agrees with me that hostile is hard in Silicon Valley).
– Kara Swisher gives a look through the prism of a classic TV show, and shows why the potentially combined company never really had a chance.
Hostile Takeover Tutorial
April 29, 2008 | Filed Under Deals
Ning chairman Marc Andreessen gives a great summary of the alternatives available if Microsoft decides to take their takeover offer of Yahoo into hostile territory.
One of the great options present to a highly successful entrepreneur like Mr. Andreessen (Netscape, Opsware) is that you can ask your favorite lawyers to work up a summary on a legal issue just for the fun of it.
He did just that, using Michael Sullivan and Ed Deibert of Howard Rice Nemerovski Canady Falk and Rabkin. They see these scenarios:
- Hostile Takeover: Microsoft moves forward with a full-fledged hostile takeover — trying to replace Yahoo’s board and/or taking its offer directly to Yahoo’s shareholders.
- Higher Offer: Microsoft raises its offer or otherwise modifies its offer terms to make them more attractive — for example, Microsoft could shift to an all-cash offer — in an attempt to make the deal happen without going fully hostile.
- Walk Away: Microsoft drops its offer and walks away; Yahoo’s stock drops to its pre-offer level of $19.18, give or take. Lots of moves and countermoves could follow: Microsoft could come back later with a lower or higher offer; Yahoo could cut a Google advertising deal to boost its revenue and margins and make itself harder to buy; Microsoft could take its $44 billion and go buy virtually every new Internet company of any consequence founded in the last 10 years; etc.
- Yahoo Caves: Yahoo’s board caves and accepts the current Microsoft offer.
- White Knight: Another bidder enters and offers Yahoo a higher price.
From a transactional fan standpoint, it’s great sport to watch a large deal that might go hostile. When I was in law school, it was the heyday of the early 1980s deal frenzy. My favorite strategy, which was playing out in real time in my Corporate Securities class: the Pac-Man defense. This one, not that one.
Private Equity Pulse Check
February 8, 2008 | Filed Under Deals, Private Equity
The New York Times DealBook scored a coup when it landed Prof. Steven Davidoff to write “The Deal Professor.”
This good professor is certainly prolific, and his entry of this past Monday really caught my eye. Entitled “Is M&A Dead?“, quite a few private equity deals gone sideways are explored, deal point by deal point. A few examples:
* Reasonable Best Efforts Clause: The Alliance Data Services litigation has highlighted the legal ambiguity and uncertain meaning in the requirement a buyer use “best efforts” to obtain regulatory approvals and take other steps to complete a deal.
* Contract Drafting generally. URI/Cerberus highlighted the problems of overly-complex and short-hand drafting. The general distrust in the market has led to overparsing and scrutiny of contract wording for fatal ambiguity.
This is great stuff, and topics such as these allow business-inclined readers of the Times into dip a toe into the icy waters of corporate and contract law without the head-first dive of law school. I would imagine they’d be great in the classroom, taking students into the deals of the day and away (for a moment) from the musty cases of yesteryear.
The best part for me, however, was this closing observation of the state of deal forms in general:
But forms are slow to change. The person who typically keeps them is an overworked senior associate. In the interim and even beyond, I would also suspect that the distrust left by private equity firms has caused lawyers to tend towards overnegotiating language on an ad hoc basis. Risk-averseness can do that.
All I can say is amen.
Prof. Davidoff formerly practiced at Shearman & Sterling and Freshfields Bruckhaus Deringer, and now teaches law at my alma mater.
Google and Microsoft GCs work Super Bowl Sunday
February 4, 2008 | Filed Under Deals, In the News
Yesterday, most of us were watching one long commercial interrupted by snippets of football. Not the GC of Microsoft, Brad Smith, or the CLO of Google, David Drummond, however.
Clearly deeply involved in the hostile offer for Yahoo, Mr. Smith struck first yesterday with a press release, noting that a Microsoft-Yahoo merger would be a welcome competitor to Google in paid advertising and search, and offer additional benefits:
Microsoft is committed to openness, innovation, and the protection of privacy on the Internet. We believe that the combination of Microsoft and Yahoo! will advance these goals.
Not to let that comment just hang there in the ether unchallenged, Mr. Drummond followed up shortly with this posting in the Google corporate blog:
Could the acquisition of Yahoo! allow Microsoft — despite its legacy of serious legal and regulatory offenses — to extend unfair practices from browsers and operating systems to the Internet?
Later in the day, according to press reports, Google CEO Eric Schmidt “reached out” to Yahoo CEO Jerry Yang and offered to “help.”
A deal of this size is good for a flagging legal economy, at the very least.
Let the real games begin…
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