MSFT act of YHOO: how did bankers come up with the $31/share price
Any insight on how MSFT came up with such a big premium to YHOO's previous trading price? Thanks guys = )
Any insight on how MSFT came up with such a big premium to YHOO's previous trading price? Thanks guys = )
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a mixture of bullshit and synergy.
But seriously, Microsoft wants to take on Google, and it can only do it with the combined force of Yahoo. They really didn't care what they have to pay for this. the offer was more or less what they felt they had to pay to acquire Yahoo...not so much of what they felt its true worth was.
You seriously think Bill Gates, Microsoft, and Microsoft's shareholders would offer to shell out $41 BILLION dollars based on Bullshit and Synergy? Clearly you are ill informed on how these things actually work. Something you must of overlooked is as early as November, Yahoo was trading at or above the $31 / share level. Microsoft enacted a brilliant tactic, and their timing (bankers) seem to be impecable. They took a recently battered and bruised shareholder base, and offered them a seemingly great "get out of jail free card" to gain back all of their losses. Yes, to current levels, the premium is large... but basically Microsoft values Yahoo the same exact way as the entire market did about 2 months ago. Do you think the intrinsic value of the company declined in the past 2 months or just the market valuation?
While I don't necessarily disagree with your overall point, I would have to answer that the intrinsic value of the company clearly did decline. Did you hear their Q4 Earnings Call? Yahoo has been rapidly declining, and the market finally caught up to what people in the valley have known for years—Yahoo is just riding off of the pageviews/brand presence they created 10 years ago when they were actually an innovative company.
While I don't think it was "Bullshit and Synergy," I think MSFT is doing a bit of a hail mary to try and do something worthwhile on the internet, at which they have failed miserably thus far despite the best wishes of Bill Gates, the Shareholders and all of their billions in the bank. It also, of course, has a lot more to do with Google than with Yahoo, again showing the desperation. Maybe it will be accretive in the short term, but MSFT is basically grabbing a falling knife by the blade here. It's hitting the ground one way or the other, the only question is how much damage will be done on the way down.
SternMonkey, no big business decisions are made without careful thought and valuation (with the exception of some biotech and start-up tech valuation...very finger-in-the-wind). Billions of dollars are at stake here, and if MSFT didn't think they would get a return at a higher growth rate than they projected for themselves as a standalone entity, they wouldn't do the deal, that simple.
PublicEquity1 is right - Bain Capital just did the same thing with Bright Horizons. Idiot financial journalists were baffled at the giant premium paid ($48.25, a 47% premium), completely ignoring the fact that as recently as October 2007, Bright Horizons was trading at over 45 dollars. Doesn't really sound like a terribly high premium now, does it?
Are investment banks advising MSFT on this deal? I seem to remember hearing they do all their M&A/Valuation work in-house.
Blackstone & Morgan Stanley
http://www.thedeal.com/dealscape/2008/02/just_in_advisers_for_microsoft…
[quote=curiousG]Blackstone & Morgan Stanley
http://www.thedeal.com/dealscape/2008/02/just_in_advisers_for_microsoft…]
Nice, thanks. It would be great to see one of these mega-acquisitions go through after ADS, Clear, etc appear to be falling apart.
Blackstone and MS advised Microsoft. Lehman and GS advised Yahoo.
http://blogs.wsj.com/deals/2008/02/01/microsoft-gives-blackstone-a-soft…
who's leading the advising syndicate for both?
assuming MS for MSFT and GS for Yahoo?
Microsoft's final offer (that is, if there is one) could go north of $45 billion. Analysts on CNBC mentioned that this could be one of several Microsoft offers. So, it'll be interesting to see how it all pans out if the MSFT and YHOO do enter negotiations.
Accounting and finance Voodoo.
"We are lawyers! We sue people! Occasionally, we get aggressive and garnish wages, but WE DO NOT ABDUCT!" -Boston Legal-
While probably many years' worth of thought and valuation went into the analysis, there's no denying that the price is actually a terrific steal because $31 is around where YHOO was trading earlier in 2007! So really, MSFT is also taking advantage of a depressed price to recent bad news, earnings, etc.
My view is that this merger is not really a great deal for either of them, but it's something that has to get done and will get done.
Why does it not make sense? Both YHOO and MSFT have been losing search market share against Google for a long time now. Google simply monetizes better, matches ads to searches more effectively, and has been gaining market share to the point where it's now at around 70% I believe.
YHOO/MSFT combined could do little to counter this. Yes, they would have some more scale, but fundamentally their technology is worse despite many attempts and billions of dollars spent trying to improve it. Combining two losing players... not a great strategy. And while there are other properties that make sense to combine, make no mistake, search is what this is really all about and where the money is.
It has to happen because YHOO shareholders have been pressuring for change for a long time, MSFT ones have similarly been wondering when their MSN/Live efforts will pay off. On paper, it seems like a great deal if you just know the companies are #2 and #3 and nothing about what I mentioned above. And YHOO really has no options left after repeatedly failing to turn itself around.
As for the $31 price - this represents around 30x TTM EBITDA, which is certainly higher than any PE firm would pay. With these market conditions, good luck getting any of them to go above 15x EBITDA for a tech company, if that. It's also close to where YHOO was trading in early 2007.
And on paper it again seems like a great deal from a 1-day premium perspective.
I'm sure they looked at cost/revenue synergies etc., but make no mistake: MSFT made this bid to win. And they can afford to do that by preemptively outbidding everyone else who could make a credible challenge.
Most of the people in this thread who are defending the MSFT price have been saying "well, look at where it was trading in 2007... it was in the 30s" (paraphrasing). However, I don't see how it follows that this particular price is right for Yahoo just because it's close to a price that Yahoo was trading at on the public markets. Using that logic, Yahoo's price two weeks ago would also be the "right price" for Yahoo.
The counter that I assume most people would use against this last point is that Yahoo's recent prices were due to fear-based selling that had nothing to do with fundamentals. However, this does not explain whether Yahoo's price in the 30s during 2007 was based on exuberance-based buying or if it was based on solid fundamentals.
Ergo, if the price that Microsoft is currently paying for Yahoo is the "right price" then someone should be able to offer a good fundamentally-based reason for the $31 per share.
-------- Right now this is a job. If I advance any higher in this company, then this would be my career. And um... Well, if this were my career, I'd have to throw myself in front of a train.
I think what the sentiment is that msft made a good bid because:
Just my opinion.
The high bid is to avoid a bidding war. Microsoft has the cash and they want Yahoo bad enough. They wanted to bid so much that no cable or web company could possibly out bid them. Although I am sure that Yahoo will retain some top banks to do their take-over defense. The offer price is mute because this will never get past regulators, especially EU regulators, where Microsoft has no friends. See my post about this for more analysis.
http://www.princeofwallstreet.com/2008/02/01/microsoft-finally-goes-hos…
The Prince of Wall Street
http://www.princeofwallstreet.com
Dude seriously- stop spamming the boards with your website. If you want to talk about the issue, that's fine, but it's really annoying to have spam about other websites on the forum; that's why there is a link section on the left.
The link he posted was extremely helpful to me in terms of offering another perspective that I hadn't thought of before.
I'm not so sure about regulators putting a stop to this deal. Microsoft search is a relatively small part of their business and a merger with Yahoo would hardly make it a monopoly. On top of that, the deal doesn't need to have approval by the EU (the EU targeted Microsoft because of their monopoly in operating systems, anyways...Yahoo has revenue to add to this).
Also, in regards to your blog post, I also disagree that a private equity buyer would interested and/or competitive, no matter how attractive the credit markets. The only reason a financial sponsor would buy a company with a negative forecast is if they had significant expertise in the field, with solid operating partners to give it confidence in a potential turnaround. None of the financial sponsors are qualified to buy and run a large cap pure tech company with little underlying hard assets, with Google as a competitor.
Trojandizzle.
The guy shouldn't be advertising his website via his entries, its annoying EVEN though it's informative to you.
Good luck on your homework assignment, hope you get a good grade.
Why can't a guy advertise his website through an entry? If he's providing useful information I really do not see the harm in it. While he might be trying to increase the number of visitors to his site and make money off advertisements, he's not selling a particular product or trying to scam people like some of the people that blatantly post on these walls.
FYI this isn't for a homework assignment...I'm a curious aspiring banker and don't have the luxury of the experience and skills that you've developed to deduce how a $31/share price came into play. There's no need to bash or make assumptions....
You made me laugh net worth :)
Anyways, my take is that it is not a good deal, why? Think of it in another way than just share prices and fair value. The price MSFT will pay is not really what matters, they won't pay a faraminous premium no matter what because they are not a retarded company; and they won't pay too cheap either because there are enough people interested in YHOO.
The way I see it is that MSFT is a huge corporate machine, with more bureaucracy than one can handle. Sure they are a great company, and the bureaucratic culture works well over there. YHOO on the other hand is completely different in that matter, they are a bit more relaxed and let entrepreneurship ideas flow more easily, an integration between the two company will see a lot of the YHOO people leave for other companies (possibly GOOG?). At best the MSFT will be able to somewhat integrat YHOO and not get any real benefits from it; and at worst there will be a major clash in synergy, and the deal would have been completely worthless. So great news for YHOO shareholders, and bad news for MSFT shareholders.
Remember, you will always be a salesman, no matter how fancy your title is. - My ex girlfriend
so banks earn fees by completed transactions i know on microsoft's side the banks will make money if they successfully acquire yahoo
but yahoo is defending so does that mean that those banks will get paid if deal fails? how much do they get paid if you cant really charge a % of completed transaction?
I've overheard that the company which is been bought usually ask for 52 week high. But I could be wrong, but that seems to land the $31 mark square on target.
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