In early 2008, Microsoft was willing to spend close to $45bn to buoy its
search position. We know what happened next: Yahoo rebuffed, Microsoft
walked away and Yahoo has floundered ever since.

It turned out to be a blessing in disguise for Microsoft. The economy,
along with the stock market, tanked later in the year, saving Microsoft
from what could have gone down as one of the worst timed deals in
M&A history.

And despite the stock market’s rebound over the past
several years, Yahoo is still valued at well under half of what
Microsoft was willing to pay in 2008.

Not surprisingly, more than a few Yahoo shareholders were not pleased with how the company handled the acquisition process. Eventually, Yahoo founder Jerry Yang resigned as CEO, and the two companies went on to finalize a search deal that gave Microsoft much of what it wanted in the first place, sans acquisition.

But apparently Microsoft’s interest in owning Yahoo hasn’t waned. According to reports, the software giant is one of the companies that has signed an NDA with Yahoo to take a look under the hood as the once high-flying consumer internet star shops itself to potential buyers.

Michael J. de la Merced of the New York Times details:

…Microsoft had held talks with potential partners last month about a possible bid, people briefed on the matter said previously. Under one such combination, Microsoft would chip in billions of dollars in financing as part of a consortium led by Silver Lake and the Canadian Pension Plan Investment Board. That group would be backstopped by billions of dollars in bank financing as well.

Interestingly, the primary motivation for Microsoft to be part of a deal for Yahoo is the preservation of its search partnership.

Conceivably, another buyer could seek to end the deal, or demand terms that are less favorable for Microsoft. That, of course, would be a blow to the company’s Bing efforts, which have already cost billions.

Recognizing this, it looks like Microsoft is in a fairly undesirable position. The deal has played an important part in Bing’s growth, but these gains haven’t come cheap and it’s unclear if and when Bing will ever generate a profit for Microsoft.

Yet if Yahoo is sold and Microsoft loses its deal, it will probably dash all hopes of it achieving its goals in the search market.

From this perspective, Yahoo could do something that was unthinkable when it blew Microsoft’s acquisition offer: get the last laugh. Even so, this will provide little consolation for Yahoo shareholders who have stuck around, as you can be sure there will be no $45bn offers this time around.