Magazine article Global Finance

Microsoft's Bid for Yahoo Gets M&A Back on Track

Magazine article Global Finance

Microsoft's Bid for Yahoo Gets M&A Back on Track

Article excerpt

Apart from the ongoing consolidation in the financial services industry, January was an extremely slow month for mergers and acquisitions. That all changed quickly on February 1, however, with Microsoft's $44.6 billion bid for Yahoo.

Microsoft's chief financial officer, Chris Liddell, says the Redmond, Washington-based software company might borrow for the first time in its history instead of drawing down its entire $21 billion cash mountain to fund the cash portion of its offer. "It's going to be a mixture of the cash we have on hand plus debt," Liddell said in an annual strategy meeting with analysts shortly after the bid for Yahoo was announced.

Microsoft agreed to pay a 62% premium to the market price to acquire Yahoo, which it hopes will help it challenge Google's dominance of the online search and advertising markets. The deal raised the hopes of investment bankers, who feared a decline in M&A activity this year following 2007's record $4.5 trillion in worldwide announced deals.

Morgan Stanley and the Blackstone Group are Microsoft's financial advisers in its unsolicited bid for Yahoo. Goldman Sachs and Lehman Brothers are advising Yahoo.

With the credit crunch putting a damper on private equity deals, the willingness of companies to use cash to make strategic acquisitions could help to support the M&A market in 2008.

Meanwhile, Bank of America agreed in January to acquire Countrywide Financial, based in Calabasas, California, and until recently the largest mortgage lender in the United States, in an allstock deal valued at more than $4 billion. Bank of America made a $2 billion cash infusion into Countrywide by buying its preferred stock last August, as financial pressures built on Countrywide during the subprime mortgage crisis.

Elsewhere in the financial services industry, the CME Group confirmed in late January that it was in preliminary talks to buy Nymex, the New York-based energy and metals exchange, in a deal valued at $11 billion. …

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