Yahoo's M&A Strategy–Maybe Local Commerce Rather Than Content (Hello, Groupon!)
It’s no secret in Silicon Valley dealmaking circles that Yahoo has been looking at what insiders have called a “transformative” acquisition to jumpstart the company.
And while many think that has to mean grabbing one of the big content companies–such as AOL (AOL) or Demand Media–right in Yahoo’s wheelhouse, sources said it is actually training its attention on, drum roll, commerce.
That would be local commerce, most specifically, innovative companies such as the hot start-up Groupon, which dominates social couponing across cities globally.
Sources said Yahoo (YHOO) has been eyeing it for possible acquisition, which would put it smack dab in the hot space around local purchasing and consumer information.
Such a deal is far from done, and Groupon investors have expressed a desire to stay independent many times.
In any case, it is an interesting shift for Yahoo, which–after a lot of executive turmoil–could use something interesting right about now.
The Internet giant, as well as Google (GOOG), had looked at social reviews site Yelp for purchase previously, and everyone is watching Groupon’s quick progress.
Sources close to the situation said that Yahoo execs involved in the strategy think of such efforts as content, providing its users with relevancy and also definite benefits.
In addition, these kinds of sites are profitable and increasing in revenue–think accretive!–and also fast-growing, which Yahoo desperately needs.
They’re also expensive, with Groupon recently garnering a valuation of well above $1 billion in a massive venture funding.
That means Yahoo might have to pay much more, up to $2 billion. It certainly has more than enough cash on hand and, of course, has its moribund stock. Yahoo has a market cap of $19.5 billion.
Groupon has been buying up companies in the U.S. and internationally with that cash, trying to solidify itself as the dominant player.
Such a move would be bold for Yahoo, which it has lacked in its merger and acquisition strategies over the years, as others like Google have bought big properties such as YouTube.
Yahoo almost bought the massive online video site, as well as Facebook, many years ago.
It also tried, and failed, to buy Foursquare, the social check-in start-up, recently.