Google Contemplates Yahoo Takeover

Search giant Google is reportedly looking into the possibility of acquiring rival Yahoo, as part of a joint-bid with private equity firms. The news follows reports that Microsoft is also considering a takeover bid.

Google could afford to buy Yahoo, which has a market value of just over $20 billion (£12.5bn), but is unlikely to lodge a solo bid.

Microsoft threat

Yahoo has struggled with falling advertising revenues and decreasing market share in recent years, but still attracts a global audience of nearly 700 million people each month.

Microsoft was last week reported to be readying a bid for Yahoo along with private equity firm Silver Lake, in its second attempt to buy Yahoo following a failed $44.6 billion (£28.2bn) bid in 2008 – something Microsoft CEO Steve Ballmer has since admitted was a “lucky escape.”

However Microsoft and Yahoo have since agreed a ten-year search and advertising deal for Microsoft’s Bing search engine to power Yahoo’s search in 2009. Its interest in acquiring Yahoo is fuelled by its desire to protect and enhance this current arrangement.

But any successful bid by Google would scupper Microsoft’s plans and would prevent Bing from becoming profitable in the medium term, despite recent deals with Nokia and RIM to expand its reach.

Any takeover bid by Google would be likely to attract the attention of regulators, as it would bring its share of the US market over its present 65 percent share. Yahoo currently controls 15.5 percent of the market, and Microsoft’s Bing search engine has 14.7 percent. Google has already faced investigations by the European Union and Federal Trade Commission over its search practices.

Other firms that could throw their hats into the ring include private equity firms KKR and Blackstone as well as Chinese Internet company Alibaba, in which Yahoo controls a 40 percent stake.