The deal that so many thought HAD to be done went belly-up in the wake of face-saving gestures and last-minute posturing. In the end, many analysts close to the 3-month drama are coming around to the idea that this was doomed to begin with. The Ballmer-Yang tango was simply too caught up in the always flammable combination of ego, desperation and klieg lights.
AllThingsD’s Kara Swisher gets the nod for breaking the story and, if that was not enough, following up with a thoughtful, well-researched rundown of the tick-by-tick events, along with a good autopsy on where things really went off the rails here.
My preliminary take on it is that what ultimately killed this acquisition was a combination of puzzling strategic missteps (Ballmer), growing internal rancor at MSFT that began to pollute the combination, pride (Yang), and hubris and miscalculation (Yang and Ballmer). In the final analysis both parties were about $5 Billion away. That fact alone would not have (and should not have) tanked the deal. So, clearly, in the final analysis this was not about money. If Microsoft really wanted to move forward it would have countered Yang’s $37 figure and a medium would have been found, in my estimation. It chose not to do so because, in my view, by that time too much distrust and animus had crept into the water supply and things became irretrievably broken.
Both sides lost, in my view. Who ends up the bigger loser remains to be seen, of course. If Yahoo! CEO Yang wants to package this to his troops as some kind of victory, it is a Pyrrhic one at best. Options for the company are still about as unpalatable as they were before this entanglement, perhaps even less so depending on what happens to YHOO stock next week. Some have opined that MSFT has $50 billion now burning a hole in its pocket, but acquisition targets are few and largely complicated in their own right. Some small properties might be acquired (Twitter? Digg?) but they will be, by and large, at the margins and not game-changing in any dramatic sense. A big move is what is required here, and there are not that many big moves left on the chessboard.
In any event, one oddity to come out of this all was Yang’s implication that Yahoo would embark upon a kind of ‘scorched earth’ policy in the event MSFT went hostile. That, in and of itself, is not unusual in M&A discussions of this magnitude. What was surprising, however, were the steps Yahoo! planned to take to muddy the waters so severely that MSFT would almost have to reject the transplant were the acquisition to proceed in a hostile fashion. The spitefulness of doing something that only makes sense so as to hurt another suitor was remarkable.
Reminds me of an old joke (with some modification for political correctness purposes) about a group of jungle explorers who are captured by cannibals. The cannibals bind the explorers and place them in a bubbling cauldron back at the campsite as young cannibals dance around them rejoicing. The cannibal chief approaches the explorers and informs them that they are to become dinner. The explorers’ skin will then be used to make canoes. The “good news”, says the chief, is that the explorers can choose how they wish to die. The first explorer, a Frenchman says, “I will take zee sword.” The chief hands him a sword. The Frenchman stands up and says, “Vive la France” and runs himself on the sword. The next explorer, a Brit, says “I will have the pistol.” The chief hands the Brit a pistol. The explorer stands up and says, “God Save the Queen,” and shoots himself dead. The third explorer, a New Yorker, says “I will take the fork.” Puzzled, the chief hands the explorer a fork. The explorer begins stabbing himself profusely with the fork, drawing copious amounts of blood and revolting all who are witnessing it. The chief says to the New Yorker, “why are you doing this?.” The explorer replies calmly in his thick Tony Soprano-esque accent, “So much for your f___ing canoe”.