FRIENDLY TAKEOVER

Prepared By:
Annu (030)
Pooja Rana (075)

FRIENDLY TAKEOVER

Isonewheretheacquireracquiresthesharesofthetargetbyinformingtheboard

ofdirectorshisintentiontopurchasethesharesofthetargetcompany

If board feels the offer is worth accepting, it recommends to the shareholders

thattheofferbeaccepted

Company Awants to acquire company B. If company Bs board agrees to the

termsofthetakeover,itisreferredtoasafriendlytakeover.

If company Bs board rejects the offer, however, company A may proceed

anywayinwhatisreferredtoasahostiletakeover.

Contd
Itisalsoknownasnegotiatedtakeover.
MergerofBrookeBondandLiptonhasformedanewentity Broke

bond lipton with permission of its Board, it is termed as Friendly

takeover
Theacquirermayeitheracquiretheassetsorpurchasethestockof

thetarget.
Friendlytakeoverscaninvolveeithertheacquisitionoftheassetsof

thecompanyorthepurchaseofthestockofthetarget.

ADVANTAGES OF FRIENDLY TAKEOVER

THROUGH PURCHASE OF ASSETS
Allows acquirer to purchase only those assets that it desires to

purchase
Acquirerisnotrequiredtotakeoveranycontingentliabilitiesofthe

target

Providestheacquirerwithanopportunitytonegotiatethepricewith

the board of directors, as the approval of the shareholders is not

required.

ADVANTAGES OF FRIENDLY TAKEOVER

THROUGH PURCHASE OF STOCK
Acquirerhastoassumetheliabilitiesofthetargetfirm
Targetfirmmaycontinuetooperateasanautonomous

subsidiaryoritmaybemergedwiththeacquiringfirm
Approval of the shareholders of the target firm is

neededforthistypeofacquisition

PROCESS OF FRIENDLY TAKEOVER

thepreparationofthepurchasingprogram
signingthepreliminaryterms
announcing the intension of purchase transaction and

explainingthereasons
the act of takeover connected with making the decisions
aboutthemake-upofnewboardofdirectors
workingouttheplanofindustrialconversion
implementationofthenewlong-termpolicyrelatedtonew
opportunities
theevaluationoftheresultsoftakeover

A CASE STUDY ON
FRIENDLY TAKEOVER
OF
YAHOO
BY
MICROSOFT

PROPOSAL (Feb. 1, 2008 )

Microsoft Corp. (NASDAQ:MSFT) has made a proposal to

the Yahoo! Inc. (NASDAQ:YHOO) Board of Directors to

acquire all the outstanding shares of Yahoo! common
stock for per share consideration of $31 representing a
total equity value of approximately $44.6 billion.
Microsofts proposal would allow the Yahoo! shareholders
to elect to receive cash or a fixed number of shares of
Microsoft common stock, with the total consideration
payable to Yahoo! shareholders consisting of one-half
cash and one-half Microsoft common stock.
The offer represents a 62 percent premium above the
closing price of Yahoo! common stock as on Jan. 31, 2008.

Steve Ballmer, CEO Microsoft

We have great respect for Yahoo!,

and together we can offer an

increasingly exciting set of solutions
for consumers, publishers and
advertisers while becoming better
positioned to compete in the online
services
market,
said
Steve
Ballmer, chief executive officer of
Microsoft.
We believe our combination will
deliver superior value to our
respective shareholders and better
choice and innovation to our
customers and industry partners .

Microsoft Gives Yahoo Three Weeks

To Accept Friendly Takeover
Microsoft said Saturday that Yahoo must accept its

buyout offer within three weeks or face a hostile proxy

battle. The company also said it would lower its offer
for the Internet giant if it's forced to go the proxy
route."It has now been more than two months since we
made our proposal to acquire Yahoo at a 62% premium
to its closing price on Jan. 31, 2008," Microsoft CEO
Steve Ballmer said in a letter to Yahoo's board.
"Our goal in making such a generous offer was to
create the basis for a speedy and ultimately friendly
transaction. Despite this, the pace of the last two
months has been anything but speedy," Ballmer said in
the letter.

TRANSACTION SUMMARY
OFFER
Transaction valued at approximately $44.6 billion in
cash and stock
62% premium to Yahoo! Closing Price on 1/31/08
>100% premium on underlying operating assets
$1 billion in synergies

WHY MICROSOFT WANTED YAHOO?

According to CEO Steve Ballmer, Microsofts interest in Yahoo
is all about:
Growing in online stature to rival Google while benefitting
from shared costs and operational efficiencies.
There are significant benefits of scale in advertising
platform economics, in capital costs for search index
build-out, and in research and development, making this
a time of industry consolidation and convergence
synergies related to scale economics would help the
combined companies to compete in a market where
there is only one competitor at scale, clearly a chair
thrown in the direction of Google.

Contd
Expanded R&D capacity would unleash new levels of

innovation. Using Microsofts definition of innovation,

that would have to mean that the deal would be all
about tying Windows and Microsofts other proprietary
technologies to Yahoos online properties and services.
Ballmer also noted operational efficiencies as an
upside to eliminating redundant infrastructure and
duplicative operating costs.
Emerging user experiences, where he again repeated
an intent to drive innovation in emerging scenarios
such as video, mobile services, online commerce,
social media, and social platforms.

Contd
Share in Web Search

Google- 53%
Yahoo- 19.9%
Microsoft- 12.9%
By buying Yahoo, Microsoft hopes to cobble together
something that can compete with Google in terms of
size.

YAHOO PRESENTS A NUMBER OF SERIOUS

CHALLENGES FOR A MICROSOFT TAKEOVER:
Any synergy between the two can already be

realized through friendly partnerships.

The two partners have massive product overlap
Microsoft and Yahoo share little culture and vision.
Brain Drain
Fleeing Customers.
Fleeing Partners

THANK YOU