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Microhoo - My Thoughts on a Microsoft-Yahoo Merger

February 3rd, 2008 by Jacob Ukelson

Well, it is in the news everywhere, the possibility of a $44B Microsoft/Yahoo merger.  Given that I have spent a lot of ink discussing how to manage mergers after they happen - I find it hard to believe that this merger will actually end-up as a net positive for either company over time. The companies are just too different. Yahoo has been spending the last few years making itself into a media company (though lately they have been talking about getting back to their technical roots), and Microsoft is, in the end, a software and engineering company. My guess is that it will be hard for the merged “Microhoo” to be both a media and software company at the same time, which will cause enormous tension w.r.t to management attention and resource allocation. I wouldn’t want to be the one who has to make that merger work…

Another point that has been discussed ad-naseum is whether this will help or hurt the start-up eco-system. I attached a table taken from the Israeli government website about recent acquisitions of Israeli comapnies. Taken in a purely Israeli context it will probably be a net plus. First of all Yahoo has been a complete non-player in Israel, while Microsoft has both a large presence and made three acquisitions lately (see the table below). People are right that Microsoft will be busy for a while digesting the acquisition, which will slow its pace. The good news is that it will probably cause other players to pick up the pace of their acquisitions - AOL (which bought Quigo and Yedda which even aren’t on the list), Ebay which has bought Shopping.com and FraudScience (also not on the list). Maybe even some of the other advertising\internet players - e.g. Google, Amazon, IAC, News Corp. will start acquiring differentiating technology in Israel which would more than make up for any slowdown by Microsoft.

Recent Israeli m&a activity chart

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